# Textbooks claim that the difference between GDP and GNP (or GNI) is about geography vs citizenship--is this correct?

Many textbooks claim that the difference between GDP and GNP is about geography vs citizenship. For example, Colander:

GDP is output produced within a country’s borders; GNP is output produced by a country’s citizens.

So, according to the above, if for all of 2017 through 2020, Hans the German citizen lived in the US and worked for Walmart, then his 2020 wages would count towards 2020 US GDP and German GNP (but not US GNP or German GDP).

But from my reading of the UN System of National Accounts (2008), this seems to be incorrect:

An institutional unit is said to be resident within the economic territory of a country when it maintains a centre of predominant economic interest in that territory, that is, when it engages, or intends to engage, in economic activities or transactions on a significant scale either indefinitely or over a long period of time, usually interpreted as one year.

So, by my reading, Hans should be counted as a US resident in 2020 and his 2020 Walmart wages should instead count towards US GDP.

Am I correct and are the textbooks wrong? (Or have I perhaps misinterpreted them?)

More examples of textbooks making the above claim.

There is another concept, called gross national product, which counts the goods and services produced by all Americans, regardless of where they work. For consistency, the outputs produced by foreigners working in the United States are not included in GNP.

Gross national product (GNP) is very similar to GDP but GNP measures what is produced by the labor and property supplied by U.S. permanent residents wherever in the world that labor or capital is located, rather than what is produced within the U.S. border.

There is a distinction between GNP and gross domestic product, or GDP. GDP is the value of final goods produced within the country. What is the difference between GNP and GDP? Part of GNP is earned abroad. For instance, the income of an American citizen working in Japan is part of U.S. GNP. But it is not part of U.S. GDP because it is not earned in the United States.

The distinction between what they produce within their borders, GDP, and what their citizens earn, GNP, is not that important to most countries.

You are correct: the difference does not depend on citizenship. (And yes, the textbooks are wrong.)

Following the SNA (2008), we have $$\text{GNP}=\text{GDP}+\text{Net Primary Income},$$

where Primary Income involves only transactions that are between a resident and a non-resident.

The crux then is whether "residency" depends on citizenship. The answer is that it doesn't. SNA (2008):

4.10 The residence of each institutional unit is the economic territory with which it has the strongest connection, in other words, its centre of predominant economic interest. ...

4.14 An institutional unit has a centre of predominant economic interest in an economic territory when there exists, within the economic territory, some location, dwelling, place of production, or other premises on which or from which the unit engages and intends to continue engaging, either indefinitely or over a finite but long period of time, in economic activities and transactions on a significant scale. The location need not be fixed so long as it remains within the economic territory. Actual or intended location for one year or more is used as an operational definition; while the choice of one year as a specific period is somewhat arbitrary, it is adopted to avoid uncertainty and facilitate international consistency. ...

26.37 A household is resident in the economic territory in which household members maintain or intend to maintain a dwelling or succession of dwellings treated and used by members of the household as their principal dwelling. If there is uncertainty about which dwelling is the principal dwelling, it is identified from the length of time spent there, rather than other factors such as cost, size, or length of tenure. Being present for one year or more in a territory or intending to do so is sufficient to qualify as having a principal dwelling there.

So yes, in your example, Hans was a US resident in 2020 and his wages from Walmart (also a US resident) count towards US GDP and do not show up in Primary Income or GNP.