0
$\begingroup$

NFFI can be calculated as income of foreigners here MINUS income of our citizens/corporations abroad. As far as I understand, it's assumed that our citizens earn income by using OUR factors of production (factors of production:enterpreneurship, capital, labor, land) abroad. Here I'm interested NOT in NFFI itself, but in it's component, namely "income of our citizens/corporations abroad".

I wonder, "What to count as OUR factor of production?". There are two intepretations:

1.It's decided by location of the factor of production. So a factory that works on territory of our country is OUR factory, no matter who owns it. (With exception for enterpreneurship and labor, these are decided by citizenship of entrepreneurs and workers, thus our enterpreneurs and workers can be employed abroad.)

2.It's decided by ownership of given factor of production. So if our citizen/corporation owns a factory located in a foreign country, then it's OUR factor of production.

$\endgroup$
0
$\begingroup$

The right (and shorter) name for " income of our citizens/corporations abroad" is "the national FFI", where FFI stands for Foreign Factor Income. I will use this name.

The second interpretation is correct, it will lead to correct calculation of the national FFI. If our corporation/citizen gets income from a factory that they own, but said factory is located abroad, then said income will contribute to size of the national FFI. Also, if instead of the national FFI we will calculate FFI of foreigners, then we will calculate their FFI taking in account what factors they own in our country. For an example, if Ivan from Russia will get income from a factory that they own in the UK (We assume that the UK is our country), then said income will increase FFI of foreigners.

The second interpretation also applies to the land. Just replace a factory with a mine.

P.S.

Comment by @1muflon1 that made this answer possible

@user161005 okay but that’s then completely different question then your original. Here the answer would be that for GDP you use 1. i.e. the location. For GNP 2. i.e the ownership. For NFFI both 1 and 2 at the same time. For FFI of home citizens you would use 2. For FFI of foreigners you would use also 2 but from their perspective. btw if this is what you ask pls edit your question and I will update your answer accordingly. In you question you only ask about NFFI which has to use both 1 and 2 at the same time since NFFI basically gives you difference between measuring with these definitions

| improve this answer | |
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.