Both Gross National Product (GNP) and Gross National Income (GNI) measure the economic growth of a given country. The primary difference between the two is in how those measurements are taken, and how economic growth is determined. GNI measures the total economic growth of a country and takes into consideration income and taxes earned both internationally and domestically, while GNP only measures the income and taxes earned by domestic citizens. There are also differences in how product development is measured and how interest payments from other countries are determined. Many countries use the terms interchangeably to determine the borrowing power of another country, and understanding the difference can be confusing.
To better understand the differences of GNP and GNI, it is necessary to have a basic understanding of the definition of both. GNI is the value of the services and products a country produces within in a calendar year combined with interest payments and dividends from outside countries in the same year. GNP is the market value of all the products and services that a country produces through the labor or property supplied by its citizens.
When measuring the GNI, economists take into consideration a number of determining factors. Of those factors, they look at the amount of income produced by the citizens through the compensation of employees or the amount of property citizens own. The difference between GNP and GNI in this measurement is that economists do not consider the amount of overseas income earned by citizens when figuring the GNP. The GNI figures include both property and income earned from residents and non-residents alike.
Another difference between the two lies within the calculation of interest payments made domestically and abroad. The GNI takes into account all interest and dividend payments received from citizens living within the country’s boarders and beyond. The GNP only measures the amount of these types of payments made from citizens living in the country. The GNI measurement is more inclusive in this instance, and it better represents the country’s true national income.
Investments in product development and classification make up another distinguishing factor between them. The GNP does not distinguish between qualitative or quantitative improvements made to various products. In other words, the GNP does not take into account the value of product improvements and technological advances, nor does it consider the number of products that companies produce. When figuring the GNI, economists take into consideration both of these factors, including qualitative and quantitative improvement in the home country and abroad.