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)
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