Gross National Income (GNI)

Gross National Income (GNI) measures the total income earned by a nation’s residents and businesses, including income earned abroad. It combines domestic production with net income from international sources to give a broader picture of national wealth than GDP alone.

What GNI includes

• Domestic output captured by Gross Domestic Product (GDP)
• Income received from abroad by residents and businesses (wages, investment income, property income)
• Adjustments for taxes on products and imports (net of subsidies) not already included in GDP

Residence, not citizenship, determines which incomes are counted: residents’ earnings are included whether they are earned at home or overseas.

How GNI is calculated

GNI = GDP + (income received from abroad by residents) − (income paid abroad to nonresidents) + (net taxes on products and imports not in GDP)

Practical components added to GDP:
– Compensation to resident employees from foreign firms
– Income from overseas property and investments owned by residents
– Net taxes on production and imports receivable (minus subsidies)

Amounts subtracted from GDP include:
– Compensation paid by resident firms to nonresident employees
– Income generated by foreign owners of domestic property

Why GNI matters

• Reflects cross-border income flows that GDP ignores, so it can better represent the economic resources available to a country’s residents.
• Useful for understanding the effects of foreign investment, remittances, and aid on national income.
• Used by international organizations (e.g., World Bank, European Union) for assessments and policy decisions.

GNI versus GDP and GNP

• GDP measures the market value of all final goods and services produced within a country’s borders in a period.
• GNI measures total income received by a country’s residents and businesses, regardless of where production occurs.
• GNP (Gross National Product) historically served a similar purpose to GNI; in many contexts GNI is the preferred, modern term because it better reflects cross-border income flows in a globalized economy.

Real-world examples

• United States: GNI and GDP are very close in size, reflecting relatively balanced cross-border income flows (example figures: GNI ≈ $29.243 trillion, GDP ≈ $29.184 trillion).
• Bangladesh: GNI can exceed GDP when a country receives substantial foreign aid or investment (example: GNI ≈ $469.5 billion vs GDP ≈ $450 billion).
• Ireland: GNI can be notably lower than GDP when foreign-owned firms book large profits domestically (example: GNI ≈ $437 billion vs GDP ≈ $577 billion).
• Countries heavily dependent on foreign aid may see GNI exceed GDP; countries with large foreign-owned production bases may see GNI fall below GDP.

When to use GNI

• To evaluate the income actually accruing to a country’s residents, including remittances and investment returns from abroad.
• For international comparisons of national income where cross-border earnings matter.
• In policy contexts where resident purchasing power and external income flows influence fiscal and development decisions.

Key takeaways

• GNI = GDP plus net income from abroad and relevant tax adjustments; it focuses on residents’ total income rather than location of production.
• It can be more informative than GDP for countries with significant foreign investment, remittances, or aid.
• International organizations commonly use GNI as a metric for economic classification and contributions.