Gross National Income (GNI)

AAA

DEFINITION of 'Gross National Income (GNI)'

The sum of a nation’s gross domestic product (GDP) plus net income received from overseas. Gross national income (GNI) is defined as the sum of value added by all producers who are residents in a nation, plus any product taxes (minus subsidies) not included in output, plus income received from abroad such as employee compensation and property income. GNI measures income received by a country both domestically and from overseas. In this respect, GNI is quite similar to Gross National Product (GNP), which measures output from the citizens and companies of a particular nation, regardless of whether they are located within its boundaries or overseas.

INVESTOPEDIA EXPLAINS 'Gross National Income (GNI)'

For most nations there is little difference between GDP and GNI, since the difference between income received by the country versus payments made to the rest of the world is not significant, as the income flows tend to balance each other out. For instance, GNI for the U.S. in 2011 was only about 1.5% higher than GDP.

But GNI can be well below GDP in the case of a nation such as Ireland, since large-scale repatriation of profits from foreign companies located there far exceeds income flows from overseas. Ireland’s GNI was 20% below its GDP in 2011, which means that although Ireland attracts substantial foreign investment that contributes to its economic growth, a big chunk of the profits arising from such foreign investment does not remain in the nation. In this case, GNI may be a better indicator of Ireland’s economic performance than GDP, since the latter overstates the strength of the Irish economy.

To convert a nation’s GDP to GNI, three terms need to be added to the former: 1) net compensation receipts, 2) net property income receivable and 3) net taxes (minus subsidies) receivable on production and imports. Let’s use Canada’s 2010 GDP and GNI numbers to understand the reconciliation between these two measures of economic output.

  • Canada’s GDP in 2010 = $1,624.6 million (~ $1.62 billion)
  • Net compensation receipts = 0
  • Net property income receivable = -$28.2 million (note the negative sign)
  • Net taxes = 0
  • Canada’s 2010 GNI = $1,624.6 + (-28.2) = $1,596.4 million (~$1.60 billion)
RELATED TERMS
  1. Economic Secession

    The exchange of goods or services outside of a traditional economic ...
  2. Financial Economics

    A branch of economics that analyzes the use and distribution ...
  3. Mainstream Economics

    A term used to describe schools of economic thought considered ...
  4. Applied Economics

    The application of economic theories and principles to real world ...
  5. Macroeconomic Stabilization Fund ...

    A reserve fund established by the country of Venezuela. Also ...
  6. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
RELATED FAQS
  1. Why would a country's gross domestic product (GDP) and gross national income (GNI) ...

    A country’s gross domestic product, or GDP, and gross national income, or GNI, are likely to differ considerably because ... Read Full Answer >>
  2. While closely related, how do gross domestic product (GDP) and gross national income ...

    Gross domestic product, or GDP, and gross national income, or GNI, are the two most important economic indicators that measure ... Read Full Answer >>
  3. Does the gross national income (GNI) and gross domestic product (GDP) of the U.S. ...

    Usually, the U.S. gross national income (GNI) and gross domestic product (GDP) do not differ substantially. Gross National ... Read Full Answer >>
  4. Is gross national income (GNI) or gross domestic product (GDP) a better measure of ...

    While gross domestic product, or GDP is among the most popular of economic indicators, gross national income, or GNI, is ... Read Full Answer >>
  5. What are the key economic indicators that are used to calculate gross national income ...

    The key economic indicators used to calculate gross national income (GNI) are gross domestic product (GDP) net compensation ... Read Full Answer >>
  6. What institutions employ the human development index (HDI)?

    Some institutions that employ the human development index (HDI) include the United Nations and the World Health Organization. ... Read Full Answer >>
  7. Who developed the human development index (HDI) and why?

    The United Nations Development Programme developed the Human Development Index (HDI) to create a uniform statistic to measure ... Read Full Answer >>
Related Articles
  1. Economics

    The Taylor Rule: An Economic Model For Monetary Policy

    This interest rate forecasting model has helped central banks around the world adjust their rates to balance out inflation.
  2. Economics

    Adam Smith: The Father Of Economics

    This free thinker promoted free trade at a time when governments controlled most commercial interests.
  3. Mutual Funds & ETFs

    Introduction To Coincident And Lagging Economic Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  4. Options & Futures

    Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.
  5. Forex Fundamentals

    The Effects Of Currency Fluctuations On The Economy

    Currency fluctuations are a natural outcome of the floating exchange rate system that is the norm for most major economies. The exchange rate of one currency versus the other is influenced by ...
  6. Economics

    Does High GDP Mean Economic Prosperity?

    GDP is the typical indicator used to measure a country's economic health. Find out what it fails to reveal and how the Genuine Progress Indicator can help.
  7. Bonds & Fixed Income

    The Fed's New Tools For Manipulating The Economy

    The economy can be volatile when left to its own devices. Find out how the Fed smoothes things out.
  8. Taxes

    Do Tax Cuts Stimulate The Economy?

    Learn the logic behind the belief that reducing government income benefits everyone.
  9. Options & Futures

    Why Wages Stick When The Economy Shifts

    Even economists can't agree on the impact (or even existence) of wage stickiness. So, how does it affect you?
  10. Bonds & Fixed Income

    How To Use Gross National Product As An Indicator

    Learn what the GNP truly represents, and how its misuse can manipulate the facts.

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!