MIBEThe economics of emerging economies

The role of Finance in economic development and the emerging economies

Gianni Vaggi, April 2014

Finance 1-4

5-REMITTANCES-B

From the paper: A better measure of standards

of living: the Gross National Disposable

Income

Clara Capelli & Gianni VaggiDepartment of Economics and management,

University of Pavia

Palestinian Territory

West Bank Gaza Strip

Gross Domestic Product (GDP)

6,257.9 4,572.3 1,685.6

GDP per capita 1,593.5 1,955.3 1,061.0

Gross National Income (GNI)

6,821.8 4,984.3 1,837.5

GNI per capita 1,737.1 2,131.5 1,156.6

Gross Disposable Income (GDI)

7,908.6 5,778.4 2.130.2

GDI per capita 2,013.9 2,471.1 1,340.9

Final Consumption Expenditure

7,868.1 6,075.3 1,792.8

Gross Capital Formation

1,179.2 1,017.5 161.7

Net Exports -2,789.5 -2,604.7 -184.8

Savings 40.5 -296.9 337.4

Palestinian Territories, National Accounts (million US$, 2011 data from PCBS)

See Giacaman 2013, MICAD Thesis

Sources• The System of National Accounts 2008 (2008 SNA) is the

latest version of the international statistical standard for the national accounts, adopted by the United Nations Statistical Commission (UNSC).

• The sixth edition of the Balance of Payments and International Investment Position Manual (2009 BPM6) written in close collaboration with the IMF Committee of Balance of Payments Statistics (Committee).

Some definitions/1

• GDP = C + I + G + (X-M)• (X-M) is the trade balance;

• GNI = GDP + NPI• NPI = remunerations of factors of production (capital and

labour) receivable from the rest of the world – those payable to the rest of the world.

• GNDI = GNI + NSI = GDP + NPI + NSI• NSI = current transfers (aid, remittances) receivable from the

rest of the world – those payable to the rest of the world.

• Current Account Balance (CAB)= X-M + NPI + NSI

Some definitions/2

• Net primary income: • Interests and dividends (on portfolio investments);• Earnings of FDIs;• Rents on land and natural resources;• Compensation of employees (cross-border workers).

• Net secondary income:• Personal transfers (i.e. remittances);• (Current) International cooperation;• Social contributions: (i.e. contributions for future pensions);• Social benefits(i.e pensions).

GNI is often confused with the GNDI and believed to be higher than the GDP in common practice, particularly in developing countries.

In 2010 UNDP replaced GDP per capita with GNI per capita in the Human Development Index

Gross national income (GNI) per capita replaces gross domestic product (GDP) per capita. This should be an unambiguous improvement: GNI reflects what citizens can do with income they receive, whereas that is not true of value added in goods and services produced in a country that go to someone outside it, and income earned abroad still benefits some of the nation’s citizens. As trade and remittance flows have been expanding rapidly, and as aid has been better targeted to very low-income countries, this distinction has become increasingly important (Todaro and Smith 2011:54)

OECD’s data on Mexicomillions US$ (current PPP)

2009 2010 2011GDP 1,605,272.4 1,713,411.0 1,905,415.0

Net primary incomes from the rest of the world

-24,886.8 -19,644.2 -27,798.8

Primary incomes receivable

11,878.9 13,199.6 15,708.3

Primary incomes payable

36,765.7 32,843.7 43,507.0

GNI 1,580,385.7 1,693,766.8 1,877,616.1

Net current transfers from the rest of the world

39,295.1 35,716.2 37,764.0

Current transfers receivable

39,409.0 35,859.6 38,054.3

Current transfers payable

113.9 143.3 290.2

GNDI 1,619,680.8 1,729,483.1 1,915,380.1

http://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE2#

Total net resource flows to developing countries by type of flow, 1990-2016f (Billions of Dollars)

Top remittance receivers in absolute terms (millions of US$)

2013 WB Database

Top remittance receivers in relative terms (millions of US$)

2013 WB Database

Why is the GNDI to be used?

• Building the HDI Index (sub-index on living standards;

• WB income thresholds to classify countries• Calculating the ANNI (Adjusted Net National

Income);• Assessing Dutch Disease phenomena;• The importance of NICA (Non-Interest Current

Account)

Remittances, Trade Balance and Current Account (millions US$, % GDP)/1

2013 WB Database

Remittances, Trade Balance and Current Account (millions US$, % GDP)/2

2013 WB Database