The gross national income (GNI), previously known as gross national product (GNP), is the total amount of factor incomes earned by the residents of a country. It is equal to gross domestic product (GDP), plus factor incomes received from non-resident by residents, minus factor income paid by residents to non-resident.[2]: 44
In contrast to GDP, GNI is not a concept of value added, but a concept of income. GNI is the basis of calculation of the largest part of contributions to the Budget of the European Union.[3] In February 2017, Ireland's GDP became so distorted from the base erosion and profit shifting ("BEPS") tax planning tools of U.S. multinationals, that the Central Bank of Ireland replaced Irish GDP with a new metric, Irish Modified GNI (or "GNI*"). In 2017, Irish GDP was 162% of Irish Modified GNI.[4]
The modern concept of GNP, along with GDP, was first developed by Simon Kuznets for a 1934 U.S. Congress report. Countries like the US and the UK originally preferred GNP as a mesure of economic activity while other like Norway preferred GDP. [6]Overtime communication harmonize around GDP included in the US which switched in 1991.
GNP was defined in the 1953 SNA as :
“the market value of product before deduction of provisions of consumption of fixed capital, attributable to factors of production supplied by normal residents of the given country”
Despite framing GNP as concept of production, the attribution of the value was define by the income earned by owner of the factor of production.
In the 1993 revision to the SNA, GNP definition was reframed from the point of view of the residents receiving income rather than the point of view of the factor of production. To reflect this, GNP was renamed GNI; the “national” part was keep as it is embedded in economic usage, even though the same concept of residence is use to defined both GDP and GNI.[7]
GNI include the salaries and wages of cross-border commuter and seasonal worker working oversea but do not include remittance send by worker to their family oversea. This explain why France GNI is higher than it’s GDP as a lot of french residents work in Luxembourg, Monaco or Switzerland; while India GNI is lower than it’s GDP despite being the larger receiver of remittance.
GNI also include the propriety income: rent, interest and “profit”. The “profit” included both distributed income of corporation (dividends) and reinvested earning on foreign direct investment, those are profit retained by the corporation. Like in the IMF balance of payments manual they are treated as if they were distributed to foreign direct investors in proportion to their ownership of the equity of the enterprise and then reinvested by them by means of additions in equity.
The GNI of EU countries also included subsided received from the EU institution and excluded tariff as those are received by EU institution.
GNI contrast with Gross national disposable income with included all current transfer income like international cooperation and remittance.
Comparison of GNI and GDP
Comparison of GNI (Atlas method). GNI and GDP 2023 World Bank (millions of current US$)
Gross national product (GNP) is the market value of all the goods and services produced in one year by labor and property supplied by the citizens of a country. Unlike gross domestic product (GDP), which defines production based on the geographical location of production, GNP indicates allocated production based on location of ownership. In fact it calculates income by the location of ownership and residence, and so its name is also the less ambiguous gross national income.
GNP is an economic statistic that is equal to GDP plus any income earned by residents from overseas investments minus income earned within the domestic economy by overseas residents.
GNP does not distinguish between qualitative improvements in the state of the technical arts (e.g., increasing computer processing speeds), and quantitative increases in goods (e.g., number of computers produced), and considers both to be forms of "economic growth".[13]
When a country's capital or labour resources are employed outside its borders, or when a foreign firm is operating in its territory, GDP and GNP can produce different measures of total output. In 2009 for instance, the United States estimated its GDP at $14.119 trillion, and its GNP at $14.265 trillion.[14]
The term gross national income (GNI) has gradually replaced the Gross national product (GNP) in international statistics.[11][12] While being conceptually identical, the precise calculation method has evolved at the same time as the name change.[15]
Use of GNP
The United States used GNP as its primary measure of total economic activity until 1991, when it began to use GDP.[16] In making the switch, the Bureau of Economic Analysis (BEA) noted both that GDP provided an easier comparison of other measures of economic activity in the United States and that "virtually all other countries have already adopted GDP as their primary measure of production".[17] Many economists have questioned how meaningful GNP or GDP is as a measure of a nation's economic well-being, as it does not count most unpaid work and counts much economic activity that is unproductive or actually destructive.[18]
GNI vs GDP
While GDP measures the market value of all final goods and services produced in a given country, GNI measures income generated by the country's citizens, regardless of the geographic location of the income. In many states, those two figures are close, as the difference between income received by the country versus payments made to the rest of the world is not significant. According to the World Bank, the GNI of the US in 2016 was 1.5% higher than GDP.[19]
In developing countries, on the other hand, the difference might be significant due to a large amount of foreign aid and capital inflow. In 2016, the GNI[20] of Armenia was 4.45% higher than GDP.[21] Based on the OECD reports, in 2015 alone, Armenia has received a total of US$409 million development assistance. Over the past 25 years, USAID has provided more than one billion USD to improve the living of the people in Armenia. GNI equals GDP plus wages, salaries, and property income of the country's residents earned abroad that also constitutes the higher GNI figure. According to the UN report on migration from Armenia in 2015–17, every year around 15–20 thousand people leave Armenia permanently,[22] and roughly 47% of those are working migrants that leave the country to earn income and sustain the families left in Armenia. In 2016 Armenian residents received in a total of around $150 million remittances.[23] Armenia's GNI, measured in US dollars, amounted to USD 13.5 billion in 2021, according to the National Statistical Office. This is an 8.23% increase over the prior year. GNI in USD terms in Armenia has historically ranged from a record high of USD 13.8 billion in 2019 to a record low of USD 1.06 billion in 1992. Regarding interest rates on GNI expressed in USD, Armenia is ranked 119th out of the 155 monitored nations.[24]
