Gross national product

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The gross national product of a country is defined as the set of final goods and services produced by its factors of production and sold on the market during a given period, generally a year.

Differences between GDP and GNP

The difference between the gross domestic product (GDP) and the gross national product (GNP) comes from the measurement of production that both make: while the GDP quantifies the total production carried out in a country, regardless of the residence of the productive factor that generates it; On the contrary, in the GNP, only the products or services obtained by productive factors residing in the country of measurement are included. By way of example, if a singer, residing in the Netherlands, travels to Spain and gives a concert in this country, this service will be included in Spain's GDP and not in the Netherlands' GDP. On the contrary, it will be included in the GNP of the Netherlands, her country of residence, but not in that of Spain.

In all real economies, the two measures differ (although in most countries this difference is very small) because a part of domestic production is owned by foreigners and a part of foreign production constitutes income for national residents. Thus, part of the income received from work in the domestic economy actually belongs to foreigners. This can be more easily appreciated if foreign workers are employed in the domestic economy. At the same time, there may be national residents who receive part of their income from abroad. They themselves can work abroad, or own shares in foreign companies. GDP measures the income from the factors of production within the nation's boundaries, regardless of who receives the income. GNP measures the income of residents in the economy, regardless of whether the income comes from domestic production or from the rest of the world.

Suppose, for example, in a country AA whose GDP and GNP we are measuring, part of the country's production comes from an oil well owned by a foreign investor resident in country BB. The income obtained from the oil well does not flow to the national residents of country AA, but to its foreign owner. As oil production takes place within AA's national territory, it constitutes part of its GDP. However, the income from that oil is not counted in the GNP of AA, but in the GNP of country BB, where the oil investor resides. For this concept the GDP of country AA is, therefore, greater than its GNP. Conversely, suppose that an investor resident in AA owns a share in a company from country CC. The dividend received by the shareholder residing in AA, is part of the GNP of country AA, but not of its GDP, for this reason the GNP of country AA is greater than its GDP.

Calculation

The calculation of GNP is made from GDP, which is the original magnitude.

• In closed economies, i.e. economy that has no contact with the rest of the world, GNP coincides with gross domestic product (GDP).
• In economies open to the outside we can obtain the GNP through GDP, starting from the following relationship:

PNB=PIB+RnRM{displaystyle PNB=PIB+RnRM}

Symbol	Name
PNB{displaystyle PNB}	Gross national product
PIB{displaystyle GDP}	Gross domestic product
RnRM{displaystyle RnRM}	Difference between primary incomes generated outside the national territory by residents and domestic primary incomes that will be perceived by non-residents

In short, as already mentioned, to obtain the GNP, you must add to the GDP the income from national factors obtained abroad (salaries, interest, benefits, etc.) and subtract the income that foreign factors have obtained in the country of calculation.

GDP can also be seen this way:

PIB=C+I+G+(X− − M){displaystyle GDP=C+I+G+(X-M)}

Symbol	Name
PIB{displaystyle GDP}	Gross domestic product
C{displaystyle C}	Consumption of families
I{displaystyle I}	Investment of enterprises
G{displaystyle G}	Government expenditure
X{displaystyle X}	Sales abroad
M{displaystyle M}	Purchase abroad