GDP vs. GNIGDP) and Gross National Income (GNI). While they both work to calculate how well a country is doing economically from year to year, or compared to other countries, the do reflect two very distinct concepts.
GDPGDP is a figure used to determine the total value of production within a country's borders by both its own citizens (and companies) and foreign ones residing there. Typically GDP is calculated as:
- GDP = Consumption + Investment + Government Spending + Exports – Imports
GNIGNI takes GDP a step further and factors in the ownership and flow of income in and out of the country to consider more than what is simply produced inside a countries borders. Typically GNI is calculated as:
- GNI = GDP + Income earned from nationals living foreign countries – Income earned from foreign nationals living in the country
GDP vs. GNIBoth GDP and GNI are useful indicators of a countries wealth but it is important to understand the clear distinction between the two. GDP is a measure based on the location of where income is produced, whereas GNI is based on the ownership of the income produced. Many consider GNI to be a better assessment of a countries wealth as in a global economy the wealth of a country can't be ignored just because some is physically located outside of the country.
The usefulness of both measures can be high as long as the distinction above is kept in mind and the correct measure is used for whatever purpose your analysis requires.
By Jeffrey Glen