As described in earlier sections, measures of income, such as national or disposable income are generally preferred, in theory, to GDP, in analyses of well-being both in nominal and real terms. However there are some specificities related to the calculation and associated interpretations of real income, as opposed to real GDP say, that are worth mentioning.

Gross Domestic Income (GDI), as opposed to Gross National Income, in current prices is exactly equal to GDP. But if the prices of a country's exports rise faster (or fall more slowly) than the prices of its imports (that is, if its terms of trade improve) fewer exports are needed to pay for a given volume of imports. Thus, an improvement in the terms of trade makes it possible for an increased volume of goods and services to be purchased by residents out of the incomes generated by a given level of domestic production. This improvement (or otherwise, e.g. if the prices of imports rise faster than exports), known as trading gains and losses from changes in the terms of trade, reflects the difference between real GDI and real GDP. It follows that it also forms part of the difference between real GDP and real national income (GNI and NNI) and disposable (and adjusted disposable) income.

These trading gains or losses are equal to the current trade balance deflated by a single price index, minus real exports, plus real imports (where estimates of real exports and real imports are consistent with those used in real GDP). And so real GDI is equal to final consumption (households, NPISH and general government final consumption) + real gross capital formation + the "real" trade balance.

Comparability

The comparability of current price measures of income is described in the previous sections. The choice of the single price index used to deflate the current trade balance varies across countries. The SNA recommends that the choice of the price index is left to statistical authorities to decide on the basis of national circumstances. Three approaches are commonly used. The first is to use either the overall import (or export) price index. The second is to use a weighted average of the overall import and export price indices. The third method, which is the approach used by many countries for simplicity, is a general price index (typically this is the implied deflator for gross domestic final expenditure). The advantage of this third approach is that the income components that reflect the difference between GNI (and other income measures) and GDP can also be (and usually are) meaningfully deflated using this same general price index.

Source

• OECD (2011), National Accounts of OECD Countries, Vol. 2011/1, OECD Publishing http://dx.doi.org/10.1787/na-v2011-1-en.

Online database

• OECD (2011), "Aggregate National Accounts: Dis-posable income and net lending/borrowing" , OECD National Accounts Statistics (database), http://dx.doi.org/10.1787/data-00002-en.

Further reading

• Eurostat (2001), Handbook on Price and Volume Measures in National Accounts, Eurostat, Luxembourg.
• Lequiller, F. and D. Blades (2007), Understanding National Accounts, OECD Publishing, http://dx.doi.org/10.1787/9789264027657-en.
• OECD (2000), System of National Accounts, 1993 - Glossary, OECD Publishing, http://dx.doi.org/10.1787/9789264180871-en.
• UN, OECD, IMF and Eurostat (eds.) (1993), System of National Accounts 1993, United Nations, Geneva, http://unstats.un.org/unsd/sna1993.