Gross National Product is another measure of the output of an
economy that is an alternate to Gross Domestic Product. The concepts
are very closely related. The distinction is that GDP is the
output which is actually produced in the country whereas GNP
is the output produced by the resources owned by the citizens
(nationals) of a country regardless of where the production takes
place. For an illustration consider the Republic of Ireland and
its citizens. The GDP of Ireland is the value of the production
in Ireland. In contrast the GNP of Ireland is the production
achieved through the use of Irish labor and capital and natural
resources owned by the Irish. If we have the GDP of Ireland and
we want to get the GNP of Ireland here are some of the adjustments
we need to make: Subtract out the profits (the payment for capital services)
made by foreign companies operating in Ireland
The amounts used in the above adjustments would be before tax.
There would be other similar adjustments for income from other
resources.
The scheme of things can be visualized by means of the following table.
| LOCATION OF PRODUCTION | ||
|---|---|---|
| OWNER OF RESOURCES | Within country | In foreign country |
| Citizens | ||
| Foreigners |
If we add the amounts which would be in the red and blue cells of the above table we would get the GDP of the country. If we add the amounts that would be in the red and green cells we would get the GNP of the country.
| Concept | _Components_ | ||
|---|---|---|---|
| GDP = | + | ||
| GNP = | + |