GDP differs from Gross National Income (GNI). GDP constitutes good and services produced within a country’s borders, while GNI refers to goods and services produced by enterprises owned by a country’s citizens. Hence, GNI is a matter of scope, while GDP is a matter of location.
Stated differently, GDP constitutes production within a country’s borders irrespective of who owns the enterprise while GNI measures production by a country’s nationals irrespective of where production takes place.
Hence, GNI and GDP do have crossover elements. Production by a domestic enterprise owned by a foreigner is part of GDP but not GNI, while production from a foreign enterprise owned by a domestic citizen is part of GNI but not GDP. Note this diagram for the overlapping and contrasting elements:
Countries that have a higher production level than that of national production have a higher GDP compared to GNI, while countries that receive sizable foreign aid and investment will have higher GNI than GDP. That is part of why the U.S. switched from GNP to GDP as its primary production metric in 1991, while some countries more dependent on foreign income or aid use GNI as their primary production metric.
That’s GNI! Let me know if you have any further questions.
To learn more about economics, consider reading about the Economic Fluctuations Model, the Gains from Expanded Trade Model, and the Spending Allocation Model. Else, consider the other articles in my Economic List below.
