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Economic Freedom of the World: 2008 Annual Report

Economic Freedom of the World: 2008 Annual Report. James Gwartney Florida State University Robert Lawson Auburn University. Measuring Economic Freedom. Economic freedom is complex and multidimensional, but it can be measured: Personal choice Freedom to trade, domestically and abroad.

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Economic Freedom of the World: 2008 Annual Report

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  1. Economic Freedom of the World: 2008 Annual Report James Gwartney Florida State University Robert Lawson Auburn University

  2. Measuring Economic Freedom • Economic freedom is complex and multidimensional, but it can be measured: • Personal choice • Freedom to trade, domestically and abroad. • Freedom to enter and compete in markets. • Security of Property/Rule of Law

  3. Methodology • We collect data on 141 countries using 42 different components (grouped into five broad areas). • 0-10 ratings are constructed to measure the degree to which the country conforms to the free-market ideal. • Third-Party data from World Bank, IMF, Global Competitiveness Report, IMD, etc. • Objective data • Survey data • Transparency is a highly valued part of the project.

  4. 5 Areas of Economic Freedom of the World (EFW) Index • Size of Government: Expenditures, Taxes, and Enterprises • Legal Structure and Security of Property Rights • Access to Sound Money • Freedom to Trade Internationally • Regulation of Credit, Labor, and Business

  5. Highest Economic Freedom Ratings, 2006 Source: EFW 2008, Exhibit 1.2.

  6. Economic Freedom Ratings of Selected Countries, 2006 Source: EFW 2008, Exhibit 1.2.

  7. Average Economic Freedom Rating, 1980-2006* *Chain-linked index. Source: EFW 2008, Exhibit 1.4.

  8. Economic Freedom and Income Source: EFW 2008, Exhibit 1.6.

  9. Economic Freedom and Growth Source: EFW 2008, Exhibit 1.7.

  10. Economic Freedom and Growth • EF (and changes in EF) are highly correlated with economic growth. • deHaan et al. (2006) survey the literature: Most studies analysing the relationship between economic growth and EF have employed cross-country (or panel) growth models...It is clear from these studies that EF seems to have a positive association with growth. None of the studies summarized reports that economic freedom is bad for growth.

  11. Economic Freedom and Income Share of Poorest 10% Source: EFW 2008, Exhibit 1.11.

  12. Economic Freedom and Income Level of Poorest 10% Source: EFW 2008, Exhibit 1.12.

  13. Economic Freedom and Life Expectancy Source: EFW 2008, Exhibit 1.13.

  14. Economic Freedom and Political Rights/Civil Liberties Source: EFW 2008, Exhibit 1.15. [Note: Lower values indicate greater political rights and civil liberties.]

  15. Economic Freedom and the Environment Source: EFW 2008, Exhibit 1.16. [Note: Higher values indicate greater environmental performance.]

  16. Website

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