What is the 'Gross Domestic Income - GDI'

Gross domestic income (GDI) is the sum of all income earned while producing goods and services within a nation's borders. GDI is a lesser-known calculation statistic used by the Federal Reserve Bank to gauge economic activity based on income. It differs from gross domestic product (GDP), which gauges the economic activity of production.

GDI is calculated as the total income payable in GDP income accounts. It can be calculated in two ways:

1. GDI = compensation of employees + gross operating surplus + gross mixed income + taxes – subsidies on production and imports

Compensation of employees encompasses the total compensation to employees for services rendered. Gross operating surplus, also known as profits, refers to the surpluses of incorporated businesses. Gross mixed income is the same as gross operating surplus, but for unincorporated businesses.

2. GDI = rental income + interest income + profits + wages + statistical adjustments

Statistical adjustments may include corporate income tax, dividends and undistributed profits.

BREAKING DOWN 'Gross Domestic Income - GDI'

According to the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce, Gross domestic income (GDI) and GDP are conceptually equivalent in terms of national economic accounting. However, GDP is calculated based on expenditure accounts, while GDI is based on incomes generated from producing GDP. The market value of goods and services consumed often differs from the amount of income earned to produce them due to sampling errors, coverage differences and timing differences. Over time, according to the BEA, "GDI and GDP provide a similar overall picture of economic activity." For annual data, the correlation between GDI and GDP is 0.97, according to BEA calculations.

Extensions of Gross Domestic Income

The GDI figures have various analytical uses. One important metric is the ratio of wages and salaries to GDI. The BEA compares this ratio with corporate profits as a share of GDI to see where the constituents — workers or company owners — stand relative to each other with respect to claims on GDI. Workers' share should be higher when unemployment is low, but recent evidence shows that is not necessarily the case — a puzzle to economists. Employee compensation to GDI is also compared with inflation trendlines. Economists look for signs of a positive correlation between a higher ratio of the former with an upward bias on the latter.

RELATED TERMS
  1. Gross Domestic Product - GDP

    GDP is the monetary value of all the finished goods and services ...
  2. Nominal Gross Domestic Product

    Nominal gross domestic product measures the value of all finished ...
  3. Gross Earnings

    1. For individuals, the total income earned in a year, as calculated ...
  4. Gross Value Added - GVA

    A productivity metric that measures the difference between output ...
  5. National Income Accounting

    A term used in economics to refer to the bookkeeping system that ...
  6. Above The Line Deduction

    An above the line deduction is an item that is subtracted from ...
Related Articles
  1. Insights

    The GDP and its Importance

    GDP is an accurate indication of an economy's size. Few data points can match the GDP and its growth rate's conciseness.
  2. Trading

    Trading GDP Like A Currency Trader

    Investors that understand and utilize the U.S. GDP report have a significant advantage over those that don't.
  3. Insights

    Economic Indicators That Affect The U.S. Stock Market

    Macroeconomic factors like GDP, Inflation, and Retail Sales affect the value of your portfolio. Understanding these economic indicators is vital for every investor in the marketplace.
  4. Insights

    One Reason Jobs Shrink: Superstar Companies

    Are superstar companies that dominate their industries but employ relatively few workers to blame for labor’s falling share of GDP?
  5. Insights

    Make America Grow Again?

    The BEA's second estimate for fourth-quarter GDP growth was … fine.
  6. Investing

    Something Gross in GDP

    GDP is used to gauge the strength of the economy, but what is it actually measuring?
  7. Insights

    Nominal vs. Real GDP

    GDP stands for gross domestic product and is the measure of the total economic output of the goods and services of a country.
  8. Insights

    What the National Debt Means to You

    The U.S. deficit seems to grow every year. But how does it actually affect you?
  9. Insights

    Q4 GDP Comes in Soft as Trump Prepares to Address Congress

    At less than 2%, quarterly GDP growth remains low. Can Trump provide the bump he's promised?
  10. Investing

    Is Net Income The Same As Profit?

    Net income and profit both deal with positive cash flow, but there are important differences between the two concepts.
RELATED FAQS
  1. How does gross profit and net income differ?

    Net income and gross profit are metrics that measure the profitability of a company and have different characteristics that ... Read Answer >>
  2. How do operating income and gross profit differ?

    Operating income and gross profit show the income earned by a company, and although they have their differences, both are ... Read Answer >>
  3. Is gross national income (GNI) or gross domestic product (GDP) a better measure of ...

    Discover why gross national income may be a better metric of an economy than gross domestic product when an economy has substantial ... Read Answer >>
  4. How are aggregate demand and GDP related?

    See why aggregate demand and gross domestic product (GDP) are necessarily the same thing according to Keynesian macroeconomic ... Read Answer >>
Hot Definitions
  1. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  2. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  3. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  4. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  5. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  6. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
Trading Center