Gross National Income (GNI) - Explained
What is GNI?
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Table of ContentsWhat is Gross National Income?How is Gross National Income Used?GDP vs GNI Conversion of GDP to GNI Academic Research on Gross National Income (GNI)
What is Gross National Income?
Gross National Income is calculated by adding the domestic product and foreign income a nation receives. It is the total of Gross Domestic Product and the income that foreign residents earn, less the income that non-residents earn in the local currency.
How is Gross National Income Used?
Gross National Income can be ascertained by adding the GDP, payments made by domestic business to local employees along with the money coming from foreign properties that the localites/residents possess. The derived amount is further deducted from the payments that domestic business firms make to foreign employees and income that foreign residents receive from local property. Unlike GDP, GNI includes the product and import taxes, and excludes subsidies. The major factor that is used to identify nationality while calculating GNI is residence. So, if the residents of the nation are making expenses within the nation, that amount will be included in GNI.
GDP vs GNI
GDP, referred to as Gross Domestic Product, considers domestic output of a nation, that means anything that is produced domestically by the country, while GNI takes into consideration both the Gross Domestic Product and the net income earned from overseas. There are countries like US where there is a small difference between the GDP and GNI implying that there was a negligible difference between the income received and the payments made to foreign nations. In contrast to this scenario, GNI tends to be more than GDP when the nation takes a lot of financial support from the foreign nations. In case, the foreign residents have a huge control over the nations output, GNI will be lower than GDP.
Conversion of GDP to GNI
Net compensation receipts, income received from net property, and net taxes (after deducting subsidies) receivable on products and good imported.