What is Gross National Income (GNI)?
Gross national income is the sum of a nation's gross domestic product and the net income it receives from overseas.
Gross National Income (GNI)
Explaining Gross National Income (GNI)
Like Gross Domestic Product (GDP), gross national income (GNI) is a measure of a country's income. However, GNI includes net income received from abroad, while GDP only counts income received from domestic sources.
GNI is also similar to Gross National Product (GNP). But GNP is calculated based on output rather than income. In practice there are slight discrepancies in measurement between the two, and GNI has come to be preferred to GNP by organizations such as the World Bank.
To calculate GNI, compensation paid to resident employees by foreign firms and income from overseas property owned by residents is added to GDP, while compensation paid by resident firms to overseas employees and income generated by foreign owners of domestic property are subtracted. Product and import taxes that are not already accounted for in GDP are also added to GNI, while subsidies are subtracted. Residence, rather than citizenship, is the criterion for determining nationality in GNI calculations, so long as the residents spend their income within the country.
Discrepancies Between GDP and 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 tends not to be significant. For instance, the U.S.'s GNI was only about 1.5% higher than its GDP in 2016, according to the World Bank.
For some countries, however, the difference is significant: GNI can be much higher than GDP if a country receives a large amount of foreign aid, as is the case with East Timor. It can be much lower if foreigners control a large proportion of a country's production, as is the case with Ireland, a low-tax jurisdiction where the European subsidiaries of several multinational companies (nominally) reside:
Converting GDP to GNI
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:
- GDP in 2010 = $1,624.6 million
- Net compensation receipts = $0
- Net property income receivable = –$28.2 million
- Net taxes = $0
- GNI = $1,624.6 – 28.2 = $1,596.4 million