The key difference can be seen in the names — gross domestic product and gross national product. GDP measures all of the sales of final goods and services domestically — within the US’s borders — plus exports and minus imports. GNP counts production by American workers or American-owned enterprises wherever they are located, but excludes production by foreign people or foreign-owned enterprises even if they are located inside the United States.
What’s the difference between GDP and GNP?
GDP is the figure we all watch closely now, but that wasn’t always the case. Up until 1991, the Commerce Department featured GNP in its quarterly reports. The government made the change in part because it said counting only the activity within a nation is better for “short-term monitoring and analysis,” according to a 1991 article from the department’s Bureau of Economic Analysis, the office that puts out quarterly GDP figures.
In addition, most other countries had already adopted GDP at the time, as had the System of National Accounts — the international standard system for how to track national economies. In this sense, the US was just catching up with the times when it made the change.
Nowadays you are most likely to encounter GNP in an old book or speech, since it isn’t widely used anymore. And for the United States, the two totals are not very different in practice. Right now, GNP is around 101 percent of GDP, and since the 1950s, that ratio has only varied between 100 and 102 percent. But for some foreign countries that have more outside investment, the difference can be considerable.
For example, a lot of the businesses located in Scotland are owned by companies based in England or elsewhere in the world. That means that if Scotland were an independent country, it’s GDP would be considerably higher than its GNP, which is potentially relevant to debates over Scottish independence.
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