What Is GNI?

Mary McMahon
Mary McMahon

Gross national income (GNI) is a measure of income produced by a nation. It is closely related to the gross domestic product (GDP), and includes many of the same figures. Economic organizations regularly produce rankings of nations by GNI, with various adjustments to contextualize the numbers they present, and this information is often available to the public. This among other measures can provide important information about economic health.

To calculate GNI, analysts look at the total value of goods and services produced within a given time period, such as a year.
To calculate GNI, analysts look at the total value of goods and services produced within a given time period, such as a year.

To determine a nation’s GNI, economists start by looking at the value of goods and services produced within the country, like they are assessing GDP. They also examine income from other sources, such as interest and dividends produced through overseas investments. All of this information can be added together to determine how much wealth the nation generated in a given time period, typically a year. Decreases may be indicative of declining economic activity or rising government debt.

One issue with GNI numbers is that looking at them in a stand alone context may not provide very much valuable information. For this reason, some charts adjust for purchasing power parity (PPP). They look at the amount paid for common goods and services between nations and use this to normalize the units used so accurate comparisons between countries can be made. If a hamburger, for example, costs $3.75 United States Dollars (USD) in one country but $7 USD in another, these nations need to be adjusted for purchasing power parity to show that a dollar goes further in one nation than the other.

Calculations of GNI take account of outflows from a nation more effectively than GDP. Measurements that just look at the value of goods and services produced can miss some important factors. If a nation has a lot of foreign investment, for example, it might produce income in the country, but that money departs to return to the parent companies. GNI measurements account for this, while GDP does not. This explains why rankings of nations by GDP and GNI often look different.

Archival data can be found in financial publications and other records. When looking at old information, it is important to pay attention to whether it was adjusted at the time, as this might skew the numbers. People comparing changes in GNI need to consider factors like inflation that might change the meaning of the information. Adjustments like changes for PPP can also create problems unless people are aware those modifications to the numbers were made.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

You might also Like

Readers Also Love

Discuss this Article

Post your comments
Forgot password?