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2007 Index of Economic Freedom

2007 Index of Economic Freedom. OUTLINE What’s New? Results How Economic Freedom is Measured Freedom and Prosperity. What’s New?. Continuity! Ranks, Scores, Usability New Academic Advisory Board New % Scores: 0-100 replaces 5-1 New Methodology: More Data-driven New Labor Freedom

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2007 Index of Economic Freedom

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  1. 2007 Index of Economic Freedom OUTLINE • What’s New? • Results • How Economic Freedom is Measured • Freedom and Prosperity

  2. What’s New? • Continuity! Ranks, Scores, Usability • New Academic Advisory Board • New % Scores: 0-100 replaces 5-1 • New Methodology: More Data-driven • New Labor Freedom • New Country Page Design • New Regions: Europe. Americas.

  3. RESULTS: Top 10 • Hong Kong 89.3% • Singapore 85.7% • Australia 82.7% • United States 82.0% • New Zealand 81.6% • United Kingdom 81.6% • Ireland 81.3% • Luxembourg 79.3% • Switzerland 79.1% • Canada 78.7%

  4. RESULTS: Distribution

  5. 10 Biggest* Economies United States 82.0% China 54.0% Japan 73.6% India 55.6% Germany 73.5% United Kingdom 81.6% France 66.1 % Italy 63.4% Russia 54.0% Brazil 60.9% WORLD 60.6% * In terms of total GDP

  6. Measuring Freedom:2007 Advisory Board • William W. Beach, co-chairman, The Heritage Foundation • Tim Kane, co-chairman, The Heritage Foundation • Maria Sophia Aguirre,Catholic University of America • Donald J. Boudreaux, George Mason University • Ike Brannon,Economist, Washington, D.C. • Simeon Djankov,World Bank • Axel Dreher,ETH Zurich • Clive Granger,University of California, San Diego • Douglas Holtz-Eakin,Council on Foreign Relations • Garett Jones,Southern Illinois University Edwardsville • Mordechai “Max” Kreinin,Michigan State University • Philippe Lacoude,Economist, Paris, France • Richard Roll,University of California, Los Angeles • Xavier Sala-i-Martin, Columbia University • Friedrich Schneider,University of Linz • Aaron Smith,University of California, Davis

  7. Measuring Freedom:The 10 Economic Freedoms • Business Freedom - Ease of starting business • Trade Freedom - Tariffs and barriers • Fiscal Freedom - Tax rates and revenue • Fdm. from Government - State spending & ownership • Monetary Freedom - Inflation and price controls • Investment Freedom - Free flow of capital • Financial Freedom - Banking institutions • Property Rights - Physical & intellectual • Fdm. from Corruption - Perception of corruption • Labor Freedom - Flexibility of labor market There are 10 Freedoms, each measured 0-100. Overall score is a simple average (equal weights).

  8. 10 Factors (Old Methodology) Regulation Trade Policy Fiscal Burden Government Intervention Monetary Policy Wages and Prices Foreign Investment Banking and Finance Property Rights Informal Market 10 Freedoms (New Methodology*)   Business Freedom   Trade Freedom   Fiscal Freedom   Freedom from Government   Investment Freedom   Financial Freedom   Property Rights   Freedom from Corruption + Labor Freedom  Monetary Freedom Measuring Freedom:Revised Methodology *New methodology is applied to all previous years, 1995-2007

  9. 1995 to 2007 Continuity (100 = no change) Explanation 50 New Data in 2005 100 100 100 95 New Data in 2007 90 New Scale in 2007 90 New Scale in 2007 90 New Scale in 2007 50 New Data in 2002 0 Introduced in 2004 Measuring Freedom:Time Series Continuity Business Freedom Trade Freedom Fiscal Freedom Freedom from Government Monetary Freedom Investment Freedom Financial Freedom Property Rights Freedom from Corruption Labor Freedom

  10. Economic Freedom and GDP Per Capita Note: log scale Sources: World Bank, World Development Indicators Online, at publications.worldbank.org/subscriptions/WDI (subscription required); Central Intelligence Agency, The World Factbook 2005, at www.cia.gov/cia/publications/factbook/index.html; International Monetary Fund, World Economic Outlook database, April 2006, at www.imf.org/external/pubs/ft/weo/2006/01/data/index.htm; and Tim Kane, Kim R. Holmes, and Mary Anastasia O’Grady, 2007 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., 2007), at www.heritage.org/index.

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