Gross National Income

What Does It Say About a Country?

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Gross national income is a measurement of a country's income. It includes all the income earned by a country's residents and businesses, including any income earned abroad. Income is defined as all employee compensation plus investment profits. It includes earnings from foreign sources.

GNI also includes any product taxes not already counted, minus subsidies. It does not count income earned by foreigners located in the country.

It also does not include the shadow or black economy.

Difference between GNI and GDP

GNI measures all income of a country's residents and businesses, regardless of where it's produced. 

Gross domestic product, on the other hand, measures the income of anyone within a country's boundaries. It doesn't matter who produces it. It includes anything earned by foreigners, including foreign businesses, while they are in the country. GDP measures production while GNI measures income.

Difference Between GNI and GNP

Including income from investments, GNI measures income earned that flows back into the country. 

Gross national product includes the earnings from all assets owned by residents. It even includes those that doesn't flow back into the country. It then omits the earnings of all foreigners living in the country, even if they spend it within the country. GNP only reports how much is earned by the country's citizens and businesses, no matter where it is spent in the world.

 

Comparison Chart

The chart below compares what is and isn't included in GDP, GNI, and GNP.

Income Earned by:GDPGNIGNP
Residents in CountryC+I+G+X C+I+G+XC+I+G+X
Foreigners in CountryIncludesIncludes If Spent in Country Excludes All
Residents Out of CountryExcludesIncludes If Remitted BackIncludes All
Foreigners Out of CountryExcludesExcludesExcludes

Formulas

To put things in a simpler form, here are the formulas to calculate GDP, GNI, and GDP.

The components of GDP are personal consumption (C) + business investment (I) + government spending (G) + [exports - imports (X)]: 

GDP = C + I + G – X.

GNI is calculated from GDP:

GNI = GDP + [(income from citizens and businesses earned abroad) – (income remitted by foreigners living in the country back to their home countries)].

GNP is calculated from GDP:

GNP = GDP + [(income earned on all foreign assets – income earned by foreigners in the country)].

GNI is calculated from GNP:

GNI = GNP + [(income spent by foreigners within the country) – (foreign income not remitted by citizens)].

Why These Differences Are Important

In many emerging markets, such as Mexico, residents move to other countries where they can earn a better living. They send lots of money back to their families in their home county. This income is enough to drive economic growth. It's counted in GNI and GNP, though not in GDP.  As a result, comparisons of GDP by country will understate the size of these countries' economies. 

GNI by Country

The World Bank provides GNI data for all countries. To compare incomes between nations, it removes the effects of currency exchange rates.

It converts everything to the U.S. dollar using purchasing power parity

The problem with the PPP method, though, is that it converts all goods and services in a country to what it would cost in the United States. On the one hand, the method works well for products like McDonald's hamburgers that are sold across the world. On the other hand, it does a poor job of estimating the value of goods not sold in America. A yak cart is one such example. Are their value the same as automobiles, the predominant form of U.S. transportation, or to similar animals such as cattle?

Measuring GDP per capita may be the best way to compare GDP between countries. This method calls for dividing a country’s economic output by its population. Nations with much higher populations may not fare as well as those with fewer people.

GNI per Capita

GNI per capita is a measurement of income divided by the number of people in the country. It compares the GNI of countries with different population sizes and standards of living

The World Bank provides this data as well. In this case, it converts income to U.S. dollars using the official exchange rate. It then applies the Atlas conversion method to smooth out exchange rate volatility. It then divides the GNI by the country's population to get GNI per capita. This is done using the country's data from the middle of the year to eliminate seasonal fluctuations. 

In Depth: Real GDP Versus Nominal GDP | GDP Versus GDP Growth Rate | Ideal Growth Rate