# Gross National Income

The gross national income ( GNI ), until 1999 also gross national product ( GNP ) ( English Gross National Income (GNI) or Gross National Product (GNP) ), is a central term from the national accounts (VGR) and an economic indicator that represents the value measures all goods and services that are produced in a billing period with the help of production factors that are owned by residents (all income generated by residents, regardless of whether they are generated domestically or abroad).

## General

This is equivalent to the income from employment and property ownership ( interest and other investment income , but not income from sales transactions ) flowed to residents , which is why gross national income is the central income indicator of an economy .

## Conceptual classification

As a sub-form of national income, the gross national income is the value of the end products and services that are produced in a certain period by production factors that are owned by residents.

It includes (in each case to the proportion in which the goods have been produced in the period under review by factors of production owned by residents):

• the consumer goods (e.g. food, clothing, gasoline, new automobiles) and services (e.g. haircuts) produced during a period at their selling prices;
• the acquisition of machines and systems by companies as well as services provided to companies that are not preliminary products (e.g. management consultancy services) at their purchase prices;
• the production of residential and commercial buildings at their selling prices;
• the purchases of goods and services by the state at their purchase prices; and the services provided by the state at their basic prices.

Hence, Gross National Income (GNI) can be thought of as the total value of current production that residents have made. Thus, it is an important indicator of national accounts ( VGR is).

## calculation

Distribution of gross national income; Until 1991 old, after 1991 new federal territory
Gross national income, net national income and national income in the Federal Republic of Germany from 1970 to 2013. Until 1991 only West Germany

The gross national income at market prices is the sum of the values ​​of the income from work ( compensation of employees ) and capital ( corporate and property income ) drawn by all residents of a country within a certain period (one year ) plus production and import taxes, minus subsidies (taxes on goods minus subsidies on products) and plus depreciation . In connection with other economic indicators, this is as follows:

 Production value (manufacturing costs, PW ) - Intermediate payments (without imported VL ) - Imports = Gross value added (unadjusted) - imputed bank fee = Gross value added (adjusted) + Taxes on goods ( ) ${\ displaystyle T ^ {ind}}$ - Subsidies on products ( Z ) = Gross domestic product (GDP) + Balance of primary income with the rest of the world = Gross National Income - Depreciation = Net national income (primary income) - Production and import taxes to the state treasury + Subsidies from the state treasury = National income

In 1999, when the ESA was introduced in 1995 , the term “gross national product” (GNP) was replaced by the term “gross national income” in the EU. The only difference in the calculation of the GNI from the GNP is that it takes account of the netted production and import taxes (e.g. customs duties) and subsidies from the EU. If the GNI is derived from the GDP at market prices, the following calculation results:

 Gross domestic product (GDP) + Balance of primary income with the rest of the world = Gross National Product (GNP) + Subsidies from the EU - Balance of production and import taxes from the EU = Gross National Income

For other economic areas, ESD and GNP are identical.

## The relationship between gross national income and the other national accounts

### Differentiation from the gross domestic product

The gross national income is similar to the gross domestic product, but differs in that the domestic concept applies to the gross domestic product , while the national concept applies to the gross national income .

The domestic concept records the economic performance in an economic sector, including the inbound commuters and disregarding the outbound commuters. In contrast to the domestic concept of gross domestic product, the domestic concept of gross national income does not consider the area in which the service was provided, but the people living in this area to whom the income from the economic services flow. This means that with the resident concept, people who are assigned to another economic sector based on their place of work (residents working abroad) are included in the calculation of benefits, while people working in the economic sector who are assigned to another economic sector based on their place of residence (foreigners working in Germany), remain unconsidered. The resident concept is based on the resident population, not on citizenship. For example, people without Austrian citizenship who live in Austria are included in the Austrian gross national income, while Austrian citizens who live abroad are not included there.

Short:

• Gross national income = all income generated by residents (regardless of whether they were earned domestically or abroad)
• Gross domestic product = all domestically generated income (regardless of whether generated by residents or foreigners)

For large economies, gross domestic product and gross national income are almost identical, while for small economies it can differ significantly. The ratio of gross national income to gross domestic product for Germany in 2009 was 1.014 and for the United States 0.998. San Marino, on the other hand, has a ratio of 0.85, and Luxembourg only 0.526.

 gross domestic product 2,498.8 - income paid to the rest of the world + 33.1 (Balance) + income received from the rest of the world = Gross National Income 2,531.9

### Difference to net national income

The distinction between gross and net national income is based on whether the wear and tear on the production facilities, the depreciation of the capital stock due to technical progress, etc. are taken into account on the basis of depreciation or not. Consequently, the net national income includes the income of residents less the depreciation.

### Demarcation from national income

On this basis, the national income and the disposable income can now be calculated. National income is closely related to gross national income, but in contrast does not include depreciation or indirect taxes.

### Overview of the basic relationship between the parameters of the national accounts

 Production value (sum of the production values ​​of the companies) - Advance payments = Gross value added + Taxes - Subsidies = Gross domestic product (GDP) (domestic concept) + Balance of primary income with the rest of the world = Gross National Income (National Concept) - Depreciation = Net national income (primary income) - Production and import taxes to the state treasury + Subsidies from the state treasury = National income - Direct taxes - Social security contributions + Transfer income = disposable income of private households

## criticism

The ESD, which was developed in the 1940s by Simon Kuznets (called BSP in German at the time) to check whether the US economy would be able to participate in World War II , has since been frequently misused as a factor of prosperity . Simon Kuznets himself described "his" indicator as " scientifically unsound " (German "scientifically unsound").

Robert F. Kennedy criticized the " Gross National Product " on March 18, 1968:

“Too much and for too long, we seemed to have surrendered personal excellence and community values ​​in the mere accumulation of material things.

Our Gross National Product, now, is over \$ 800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife. And the television programs which glorify violence in order to sell toys to our children.

Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.

And it can tell us everything about America except why we are proud that we are Americans. "

“It seems we have given up too much, for too long, personal improvement and community values ​​in favor of the sheer accumulation of material values.

Our Gross National Income is now over \$ 800 billion a year, but that Gross National Income - if we measure the US by that - includes air pollution and cigarette advertising, and ambulances cleaning up the bloodbath of our highways. It includes special locks for our doors and prisons for the people who break them. It takes into account the destruction of the sequoia tree and the loss of our natural wonders through chaotic urban sprawl . It includes napalm , nuclear warheads and armored cars for the police in the fight against rioting in our cities. It includes Whitman's rifle [note: Charles Whitman was a gunman] and Speck's knife [note: Richard Speck was a serial killer]. And the television programs that glorify violence to sell toys to our children.

But gross national income has no place for the health of our children, the quality of their upbringing or their enjoyment of play. It does not include the beauty of our poetry, the strength of our marriages, the intelligence of our public debate, or the integrity of our public officials.

It does not measure our quick-wittedness or our courage, our wisdom or our learning, our compassion or our devotion to our country. In short: it measures everything, except what makes life worth living.

And it can tell us anything about America - except why we are proud to be Americans. "

- Robert F. Kennedy

## Alternatives

In order to develop more accurate indicators of actual wealth , the following indicators, among others, were developed:

All of these indicators aggregate a large amount of data that are not included in gross national income (see aggregation (economy) ).

Amartya Sen formed the welfare function as an alternative, for example, to the median of the product of gross national income and the relative equal distribution of this income.

In Germany, from January 2011 to June 2013, the Enquete Commission on Growth, Prosperity, Quality of Life of the Bundestag looked for a possible new measure of prosperity and progress beyond the growth fixation of the previously dominant gross national product.

Andrew Oswald , Professor of Economics at the University of Warwick, believes that ESD as a measure of "prosperity" is out of date. He suggests developing a benchmark to measure the “happiness and emotional well-being of citizens”.

Wiktionary: Gross National Income  - explanations of meanings, word origins, synonyms, translations

## literature

• Dieter Brümmerhoff : National accounts . 7th edition. Oldenbourg, Munich Vienna, 2011; ISBN 978-3-8006-3763-8 .
• Olivier Blanchard and Gerhard Illing: Macroeconomics . 4th updated edition. Pearson Studium, Munich, 2006, ISBN 3-8273-7051-5
• Manfred Gärtner: macroeconomics . second edition. Prentice Hall, Europe, 2000
• Samuelson A. Paul and Nordhaus D. William: Fundamentals of Macro and Microeconomics Volume 1 . 8th fundamentally revised German edition. Cologne, 1987, ISBN 3-7663-0985-4
• Elmar Kulke: Economic Geography . 5th edition, Ferdinand Schoehningh, Paderborn, 2004, ISBN 978-3-8252-4016-5 .
• Daniel Speich Chassé : The Invention of the Gross National Product. Global inequality in the history of knowledge of the economy . Vandenhoeck & Ruprecht, Göttingen 2013, ISBN 978-3-525-37031-5 .

Wiktionary: Gross National Product  - explanations of meanings, word origins, synonyms, translations

## Individual evidence

1. Gerhard Graf: "Fundamentals of Economics." 2002, 2nd edition, Springer Verlag, ISBN 978-3790814842 , p. 127 ff.
2. ^ System of National Accounts : " GNI " in the glossary; accessed: August 31, 2016
3. ^ Speech at the University of Kansas; two days after he declared himself a candidate for president.
4. Bob Kennedy on GDP ( Memento of September 11, 2010 in the Internet Archive ) on ecopolis.org, accessed on January 24, 2013.
5. The equal distribution is one minus the unequal distribution (e.g. Gini coefficient ).
6. Roland Pichler: We want to get away from the belief in growth , badische-zeitung.de, Wirtschaft, January 12, 2011, accessed on January 23, 2011