Gross National Product (GNP)
What is Gross National Product (GNP)?
GNP is the total value of goods and services produced by a country's residents, wherever in the world they produce them.
Unlike GDP, which counts output produced within a country's borders, GNP counts output by a nation's people and firms regardless of location. GNP = GDP + income earned abroad by residents − income earned domestically by foreigners.
Gross National Product (GNP): a worked example
Suppose a small open economy records GDP of $900 billion. Its residents, including citizens working overseas and firms operating foreign subsidiaries, earn $60 billion of income abroad. Foreign owned firms and foreign workers earn $85 billion inside its borders. Net income earned abroad = $60 billion - $85 billion, which is negative $25 billion, so GNP = $900 billion - $25 billion = $875 billion. GNP sitting below GDP is the signature of a host economy where foreign capital produces a large share of local output. Flip the two flows and the picture reverses: if residents earned $85 billion abroad while foreigners earned $60 billion at home, net income would be positive $25 billion and GNP would reach $925 billion, above GDP. The output produced inside the borders is identical in both cases. Only the claim on that income changes.
The mistake students make with gross national product (gnp)
Remembering the formula as GDP plus income earned abroad, and stopping there, makes GNP larger than GDP every single time. Two flows move in opposite directions. Income residents earn abroad is added, and income foreigners earn inside the country is subtracted, so the sign of the total depends on which flow is bigger. A country hosting far more foreign owned production than its residents own overseas reports a GNP below its GDP, and a one sided version of the formula cannot produce that result at all. Write the subtraction in before plugging any numbers into it.
Gross National Product (GNP) questions
What is the difference between GDP and GNP?
GDP counts everything produced inside a country's borders, whoever owns the factory or holds the passport. GNP counts everything produced by a country's residents, whichever country they happen to be standing in. A foreign owned plant operating locally adds to domestic GDP but to the owners' GNP. A citizen working abroad adds to the host country's GDP but to the home country's GNP. Location decides GDP, ownership decides GNP.
Why do countries report GDP instead of GNP?
GDP lines up with what governments most need to track: production, employment, and capacity use inside their own borders, all of which respond to domestic policy and generate domestic tax revenue. A finance ministry writing a budget cares about the tax base standing inside the country, and a central bank watching inflation cares about how hard domestic capacity is being pushed. GNP answers a different question, about who ultimately earns the income, which speaks to residents' living standards more than to managing the domestic economy.
Is GNP the same as gross national income?
GNP and gross national income measure the same total from two directions, output attributed to a country's residents on one side and the income those residents earn on the other. National accounts now publish the figure under the income label, and most sources treat the two names as interchangeable at the level of an introductory course. Either way the contrast with GDP holds: residents wherever they produce, rather than production wherever it happens inside the borders.
Formula / Example
Related terms
Common comparisons
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