Gross national income

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While per capita Gross domestic product is the indicator most commonly used to compare income levels, two other measures are preferred by many analysts. These are per capita gross national income (GNI) and net national income (NNI).

 

What is gross national income?

Gross national income is defined as Gross domestic product GDP plus net receipts from abroad of wages and salaries and of property income.

Wages and salaries from abroad are those that are earned by residents, that is, by persons who essentially live and consume inside the economic territory but work abroad (this happens in border areas on a regular basis) or for persons that live and work abroad for only short periods (seasonal workers) and whose centre of economic interest thus remains in their home country. Guest-workers and other migrant workers who live abroad for twelve months or more are considered to be resident in the country where they are working. Such persons may send part of their earnings to relatives at home, but these remittances are treated as transfers between resident and non-resident households and do not enter into net receipts from abroad of wages and salaries.

 

Property income from abroad includes interest, dividends and all or part of the retained earnings of foreign enterprises owned fully or in part by residents. In most countries, net receipts of property income account for most of the difference between GDP and GNI. Note that retained earnings of foreign enterprises owned by residents may not actually return to the residents concerned, and, in some countries, there are restrictions on the repatriation of profits. Receipt of retained earnings is an imputation, and, since there is no actual transaction, it is necessary to impute an outflow of the same amount. The imputed outflow is treated as a financial transaction (a reinvestment of earnings abroad) and not as an outflow of property income. Countries with large stocks of outward foreign direct investment may be shown as having large receipts of property income from abroad and therefore high GNI even though much of the property income may never actually be returned to the country, but instead add to the foreign direct investment.

 

Depreciation, which is deducted from GNI to obtain NNI, is the decline in the market value of fixed capital assets - dwellings, buildings, machinery, transport equipment, such as physical infrastructure, software, etc. - through wear and tear and obsolescence.

 

Comparability

Both measures are compiled according to the definitions of the 1993 System of National Accounts, except for Australia, Canada, Israel, Mexico and the United States which have already implemented the SNA 2008 methodology. The majority of OECD countries will start in 2014 providing data on the basis of this new methodology. There are, however, practical difficulties in the measurement both of international flows of wages and salaries and property income and of depreciation. It is for that reason that GDP per capita is the most widely used indicator of income or welfare, even though it is theoretically inferior to either GNI or NNI.

References

OECD (2013), National Accounts of OECD Countries, Vol. 2013/2, OECD Publishing, http://dx.doi.org/10.1787/na_ma_dt-v2013-2-en

OECD (2013), OECD Economic Outlook, Vol. 2013/2, OECD Publishing, http://dx.doi.org/10.1787/eco_outlook-v2013-2-en

Maddison, A. (2003),The World Economy: Historical Statistics, Development Centre Studies, OECD Publishing, http://dx.doi.org/10.1787/9789264104143-en also available on CD-ROM, www.theworldeconomy.org.

OECD (2003), The Sources of Economic Growth in OECD Countries, OECD Publishing, http://dx.doi.org/10.1787/9789264199460-en

OECD (2000), System of National Accounts, 1993 - Glossary, OECD Publishing, http://dx.doi.org/10.1787/9789264180871-en

http://unstats.un.org/unsd/sna1993.
Annual National Accounts.
OECD Economic Outlook Statistics
OECD Economic Outlook - Sources and Methods, www.oecd.org/eco/sources-and-methods.

oecd.stat: http://dotstat.oecd.org/Index.aspx

SNA2008 http://unstats.un.org/unsd/nationalaccount/sna2008.asp

See Also

NNI per capita series are available on OECD.Stat: http://stats.oecd.org/index.aspx?queryid=19801. These series are updated every day and are free.