National income per capita
While per capita gross domestic product is the indicator most commonly used to compare national income levels, two other measures are preferred by many analysts. These are per capita Gross National Income (GNI) and Net National Income (NNI). Whereas GDP refers to the income generated by production activities on the economic territory of the country, GNI measures the income generated by the residents of a country, whether earned in the domestic territory or abroad. NNI is the aggregate value of the balances of net primary incomes summed over all sectors.
Definition
GNI is defined as GDP plus receipts from abroad less payments to abroad of wages and salaries and of property income plus net taxes and subsidies receivable from abroad. NNI is equal to GNI net of depreciation.
Wages and salaries from abroad are those that are earned by residents who essentially live and consume inside the economic territory but work abroad (this happens in border areas on a regular basis) or for persons that live and work abroad for only short periods (seasonal workers) and whose centre of economic interest remains in their home country. Guest-workers and other migrant workers who live abroad for twelve months or more are considered to be resident in the country where they are working. Such persons may send part of their earnings to relatives at home, but these remittances are treated as transfers between resident and non-resident households and are recorded in national disposable income but not national income.
Property income from/to abroad includes interest and dividends. It also includes all or part of the retained earnings of foreign enterprises owned fully or in part by residents (and vice versa). In this respect, it is important to note that retained earnings of foreign enterprises owned by residents do not actually return to the residents concerned. Nevertheless, the retained earnings are recorded as a receipt.
Comparability
All countries compile data according to the 2008 SNA “System of National Accounts, 2008” with the exception of Chile, Japan, and Turkey, where data are compiled according to the 1993 SNA. When changes in international standards are implemented countries often take the opportunity to implement improved compilation methods; therefore also implementing various improvements in sources and estimation methodologies. In some countries the impact of the ‘statistical benchmark revision’ could be higher than the impact of the changeover in standards. As a consequence the GDP level for the OECD total increased by 3.8% in 2010 based on the available countries. The level changes in NNI are generally more moderate than the changes in the levels of GDP. For the OECD, the impact of the changes on NNI is about 0.5 percentage points on average in 2010.
However, there are practical difficulties in the measurement both of international flows of wages and salaries and property income and of depreciation. It is for that reason that GDP per capita is the most widely used indicator of income or welfare, even though, GNI is theoretically superior.
On average for the OECD, GNI per capita is around 15-25% higher than NNI per capita. The country rankings are not greatly affected by the choice of income measure. Only three countries would be more than one place higher in the ranking if GNI per capita were used instead of NNI: the Slovak Republic, the Czech Republic, and Finland. Only four countries would be more than two places lower in the ranking if GNI per capita were used: Russia, Israel, Ireland and the United Kingdom.
GNI per capita does not differ significantly from GDP per capita. Usually, the differences are smaller than USD 3 000. There are, however, two exceptions. For Luxembourg, GNI per capita in 2014, although still highest in the OECD, is nearly USD 33 000 lower than GDP per capita. In Ireland, GNI is USD 8 000 lower than GDP per capita in 2013.
Sources
-
OECD (2015), National Accounts of OECD Countries, OECD Publishing.
Further information
Analytical publications
-
OECD (2015), OECD Economic Outlook, OECD Publishing.
-
OECD (2014), Perspectives on Global Development, OECD Publishing.
-
OECD (2003), The Sources of Economic Growth in OECD Countries, OECD Publishing.
Statistical publications
-
OECD (2015), National Accounts at a Glance, OECD Publishing.
Methodological publications
-
OECD, et al. (eds.) (2010), System of National Accounts 2008, United Nations, Geneva.
Online databases
Websites
-
Sources & Methods of the OECD Economic Outlook, www.oecd.org/eco/sources-and-methods.
