Economic Freedom of the World 2011

Economic Freedom of the World 2011

Annual Report

Most Free 2nd Quartile 3rd Quartile Least Free

James Gwartney, Robert Lawson, & Joshua Hall with Jean-Pierre Chauffour & Michael D. Stroup

Economic Freedom of the World 2011 Annual Report

James Gwartney Florida State University

Robert Lawson

Joshua Hall

Southern Methodist University

Beloit College

with

Jean-Pierre Chauffour

Michael D. Stroup

World Bank

Stephen F. Austin State University

2011

Copyright ©2011 by the Fraser Institute. All rights reserved. No part of this book may be reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. The authors of this book have worked independently and opinions expressed by them are, therefore, their own and do not necessarily reflect the opinions of the supporters, trustees, or staff of the Fraser Institute. This publication in no way implies that the Fraser Institute, its trustees, or staff are in favor of, or oppose the passage of, any bill; or that they support or oppose any particular political party or candidate. Published in cooperation with the Economic Freedom Network Editing, design, and typesetting by Lindsey Thomas Martin Cover design by Bill Ray Printed and bound in Canada

Data available to researchers The full data set, including all of the data published in this report as well as data omitted due to limited space, can be downloaded for free at <http://www.freetheworld.com>. The data file available there contains the most up-to-date and accurate data for the Economic Freedom of the World index. Some variable names and data sources have evolved over the years since the first publication in 1996; users should consult earlier editions of the Economic Freedom of the World annual reports for details regarding sources and descriptions for those years. All editions of the report are available in PDF and can be downloaded for free from <http://www.freetheworld.com/datasets_efw.html>. However, users are always strongly encouraged to use the data from this most recent data file as updates and corrections, even to earlier years’ data, do occur. Users doing long-term or longitudinal studies are encouraged to use the chain-linked index as it is the most consistent through time. If you have problems downloading the data, please contact Jean-François Minardi via e-mail to <freetheworld@fraserinstitute.org> or via telephone +1.514.281.9550 ext. 306. If you have technical questions about the data itself, please contact Robert Lawson via e-mail to <rlawson@smu.edu>. Please cite the data set as: Authors: James Gwartney, Robert Lawson, and Joshua Hall Title: 2011 Economic Freedom Dataset, published in Economic Freedom of the World: 2011 Annual Report Publisher: Fraser Institute Year: 2011 URL: <http://www.freetheworld.com/datasets_efw.html>

Cite this publication Authors: James Gwartney, Robert Lawson, and Joshua Hall Title: Economic Freedom of the World: 2011 Annual Report Publisher: Fraser Institute Date of publication: 2011 Digital copy available from <www.fraserinstitute.org> and <www.freetheworld.com>

Cataloguing Information Gwartney, James D. Economic freedom of the world … annual report  /  James D. Gwartney. Annual. Description based on: 1997 2011 issue by James Gwartney, Robert Lawson, and Joshua Hall, with Jean-Pierre Chauffour and Michael D. Stroup. Issued also online. ISSN 1482-471X; ISBN 978-0-88975-252-8 (2011 edition). 1. Economic history--1990- --Periodicals.  2. Economic indicators--Periodicals. I. Fraser Institute (Vancouver, B.C.)  II. Title

Economic Freedom of the World: 2011 Annual Report  iii

Table of Contents

Executive Summary / v

Chapter 1

Economic Freedom of the World, 2009  /  1

Chapter 2

Country Data Tables  /  25

Chapter 3

What Matters for Development—Freedom or Entitlement?  /  167 by Jean-Pierre Chauffour

Chapter 4

Does Economic Freedom Promote Women’s Well-being?  /  179 by Michael D. Stroup

Appendix

Explanatory Notes and Data Sources  /  191

About the Authors  /  203

About the Contributors  /  204

Acknowledgments / 205

About the Members of the Economic Freedom Network  /  206

Economic Freedom of the World: 2011 Annual Report  v

Executive Summary Economic Freedom of the World The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property. Forty-two data points are used to construct a summary index and to measure the degree of economic freedom in five broad areas:

1 2 3 4 5

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.

Economic freedom has suffered another setback

• The chain-linked summary index (exhibit 1.4) permits comparisons over time. The average economic freedom score rose from 5.53 (out of 10) in 1980 to 6.74 in 2007, but fell back to 6.67 in 2008, and to 6.64 in 2009, the most recent year for which data are available. (See chapter 1 for a discussion.)

• In this year’s index, Hong Kong retains the highest rating for economic freedom, 9.01 out of 10. The other nations among the top 10 are: Singapore (8.68); New Zealand (8.20); Switzerland (8.03); Australia (7.98); Canada (7.81); Chile (7.77); United Kingdom (7.71); Mauritius (7.67); and the United States (7.60).

• The rankings (and scores) of other large economies are Germany, 21 (7.45); Japan, 22 (7.44); France, 42 (7.16); Italy, 70 (6.81); Mexico, 75 (6.74); Russia, 81 (6.55); China, 92 (6.43); India, 94 (6.40); and Brazil, 102 (6.19).

• The bottom 10 nations are: Zimbabwe (4.08); Myanmar (4.16); Venezuela (4.28); Angola (4.76); Democratic Republic of Congo (4.84); Central African Republic (4.88); Guinea-Bissau (5.03); Republic of Congo (5.04); Burundi (5.12); and Chad (5.32).

The world’s largest economy, the United States, has suffered one of the largest declines in economic freedom over the last 10 years, pushing it into tenth place. Much of this decline is a result of higher government spending and borrowing and lower scores for the legal structure and property rights components. Over the longer term, the summary chainlinked ratings of Venezuela, Zimbabwe, United States, and Malaysia fell by eight-tenths of a point or more between 1990 and 2009, causing their rankings to slip. The chain-linked summary ratings of Uganda, Zambia, Nicaragua, Albania, and Peru have increased by three or more points since 1990. The summary ratings of eight other countries—Bulgaria, Poland, El Salvador, Romania, Ghana, Nigeria, Hungary, and Guinea-Bissau—increased by between two and three points during this same period.

vi  Economic Freedom of the World: 2011 Annual Report

Nations that are economically free out-perform non-free nations in indicators of well-being

• Nations in the top quartile of economic freedom had an average per-capita GDP of $31,501 in 2009, compared to $4,545 for those nations in the bottom quartile, in constant 2005 international dollars (exhibit 1.9).

• Nations in the top quartile of economic freedom had an average growth in per-capita GDP between 1990 and 2009 of 3.07%, compared to 1.18% for those nations in the bottom quartile, in constant 2005 international dollars (exhibit 1.10).

• In the top quartile, the average income of the poorest 10% of the population was $8,735, compared to $1,061 for those in the bottom quartile, in constant 2005 international dollars (exhibit 1.12). Interestingly, the average income of the poorest 10% in the top quartile is almost double the overall income per capita in the bottom quartile ($4,545, exhibit 1.9): the poorest people in the most economically free countries are nearly twice as rich as the average people in the least free countries.

• Life expectancy is 79.4 years in the top quartile compared to 60.7 years in the bottom quartile (exhibit 1.13).

• The $1.25-per-day poverty rate is 2.7% in the top quartile compared to 41.5% in the bottom quartile (exhibit 1.17).

Chapter 1: Economic Freedom of the World The principal authors of the report, James Gwartney (Florida State University), Robert Lawson (Southern Methodist University), and Joshua Hall (Beloit College), provide an overview of the report and discuss why economic freedom is important.

Chapter 2: Country Data Tables Detailed historical data is provided for each of the 141 countries and territories in the index. For many countries, this covers years 1980, 1985, 1990, 1995, 2000, 2005, 2008, and 2009.

Chapter 3: What Matters for Development: Freedom or Entitlement? Jean-Pierre Chauffour, Lead Economist, Middle East and North Africa Region, World Bank, examines policies that promote “freedom” compared to “entitlement” in relation to economic development. He notes that, depending on the balance between free choices and more coerced decisions, individual opportunities to learn, own, work, save, invest, trade, protect, and so forth could vary greatly across countries and over time. Chauffour’s empirical findings suggest that fundamental freedoms are paramount in explaining long-term economic growth. For a given set of exogenous conditions, countries that favor free choice—economic freedom and civil and political liberties—over entitlement rights are likely to achieve higher sustainable economic growth and to achieve many of the distinctive proximate characteristics of success identified by the Commission on Growth and Development (World Bank, 2008). In contrast, pursuing entitlement rights through greater coercion by the state is likely to be self-defeating in the long run. These findings provide potentially important policy lessons for all countries. For developed countries, they suggest that prioritizing economic freedom over social entitlements could be an effective way to reform the welfare state and make it more sustainable and equitable in the long run. For middle-income countries (such as countries in the midst of the Arab Spring and countries in Asia and Latin America), they indicate that the quest for civil and political rights and for economic freedom could create the conditions for new social contracts. For low-income countries, they provide an opportunity to reflect on the achievements under the Millennium Development Goals (MDG) and the potential role that economic freedom and other fundamental freedoms that could play in a post-2015 MDG development agenda.

Economic Freedom of the World: 2011 Annual Report  vii

Chapter 4: Does Economic Freedom Promote Women’s Wellbeing? Michael D. Stroup, Stephen F. Austin State University, examined the impact of economic freedom on women’s wellbeing based on a recent United Nations Development Project (UNDP) report. He finds that a one-point increase in the average EFW index, controlling for other relevant factors, was found to be associated with:

• a decline in the UNDP Gender Inequality (GI) index of 0.03 with the sample average at 0.53;

• a decline in the maternal death rate by 131 women per 100,000 births with the sample average at 300;

• a reduction of over six births per 1,000 births to females age 15–19 when the sample average is 53;

• an increase of almost five percentage points in the percentage of women with a secondary education when the sample average is 52%;

• an increase of two percentage points in the number of women holding seats in parliament in the legislative branch of a national government when the sample average is 18%.

Data available to researchers The full data set, including all of the data published in this report as well as data omitted due to limited space, can be downloaded for free at <http://www.freetheworld.com>. The data file available there contains the most up-to-date and accurate data for the Economic Freedom of the World index. Some variable names and data sources have evolved over the years since the first publication in 1996; users should consult earlier editions of the Economic Freedom of the World annual reports for details regarding sources and descriptions for those years. All editions of the report are available in PDF and can be downloaded for free from <http://www.freetheworld.com/datasets_efw.html>. However, users are always strongly encouraged to use the data from this most recent data file as updates and corrections, even to earlier years’ data, do occur. Users doing long-term or longitudinal studies are encouraged to use the chain-linked index as it is the most consistent through time. If you have problems downloading the data, please contact Jean-François Minardi via e-mail to <freetheworld@fraserinstitute.org> or via telephone +1.514.281.9550 ext. 306. If you have technical questions about the data itself, please contact Robert Lawson via e-mail to <rlawson@smu.edu>. Please cite the data set as: Authors: James Gwartney, Robert Lawson, and Joshua Hall Title: 2011 Economic Freedom Dataset, published in Economic Freedom of the World: 2011 Annual Report Publisher: Fraser Institute Year: 2011 URL: <http://www.freetheworld.com/datasets_efw.html>

Economic Freedom of the World: 2011 Annual Report  1

Chapter 1 Economic Freedom of the World, 2009 This year’s Economic Freedom of the World reflects a quarter of a century of research and development in the measurement of economic freedom. Numerous scholars, including Nobel Prize winners Milton Friedman, Douglass North, and Gary Becker, have contributed to this project. The EFW measure now covers 141 countries and provides reliable data for approximately 100 of them back to 1980. The concept of economic freedom The key ingredients of economic freedom are:

• • • •

personal choice, voluntary exchange coordinated by markets, freedom to enter and compete in markets, and protection of persons and their property from aggression by others.

These four cornerstones imply that economic freedom is present when individuals are permitted to choose for themselves and engage in voluntary transactions as long as they do not harm the person or property of others. Individuals have a right to decide how they will use their time, talents, and resources, but they do not have a right to the time, talents, and resources of others. Put another way, individuals do not have a right to take things from others or demand that others provide things for them. Use of violence, theft, fraud, and physical invasions are not permissible but, otherwise, individuals are free to choose, trade, and cooperate with others, and compete as they see fit. In an economically free society, the primary role of government is to protect individuals and their property from aggression by others. The EFW index is designed to measure the extent to which the institutions and policies of a nation are consistent with this protective function. In order to achieve a high EFW rating, a country must provide secure protection of privately owned property, evenhanded enforcement of contracts, and a stable monetary environment. It also must keep taxes low, refrain from creating barriers to both domestic and international trade, and rely more fully on markets rather than the political process to allocate goods and resources.

Why economic freedom is important Numerous scholarly articles have used the EFW data to examine the relationship between economic freedom and various measures of economic and social performance. This research indicates why economic freedom is vitally important to a society. We will mention just four areas of research below. Exhibt 1.1 provides a list of selected scholarly articles in each of these areas. 1  Economic freedom and investment, income, and growth

Economic freedom leads to more investment, higher percapita incomes, and growth rates. Dozens of studies have investigated the relationship between economic freedom on the one hand and investment, economic growth, and per person income on the other. These studies typically control for geographic, locational, political, educational, and numerous other factors. Most of them have found that higher levels of economic freedom, or certain components of economic freedom, exert an independent positive impact on investment, economic growth, and income per capita. 2  Economic freedom, reductions in poverty, and improvements in human welfare

Economic freedom leads to less poverty and improvements in the general living conditions of a society. Critics sometimes charge that economic freedom and market allocation often result in the poor being left behind but research in this area is inconsistent with this view. As seen in exhibit 1.17 at the end of this chapter, countries with persistently high levels of economic freedom have lower poverty rates. Moreover, those that move toward more economic freedom enjoy better living standards across multiple dimensions. 3  Economic freedom, cooperation, tolerance, and peaceful relations

Economic freedom encourages cooperation, tolerance, and peaceful relations. Voluntary exchange is the centerpiece of economically free economies. Both parties to an exchange gain and therefore buyers and sellers are encouraged to interact with those who give them the best deal, regardless of their racial, religious, ethnic, gender, or

2  Chapter 1: Economic Freedom of the World, 2009

tribal characteristics. Markets reward those who serve is limited to protection of people and their property and others, including those they do not necessarily like. When even-handed enforcement of contracts and settlement markets thrive, people with vastly different characteris- of disputes, entrepreneurs will get ahead by discovering tics often interact peacefully with each other. In turn, the highly valued products and lower-cost methods of producpeaceful interaction among diverse groups encourages tol- tion. Profits will direct resources toward productive projerance and promotes understanding. In contrast, political ects—those that increase the value of resources. Similarly, allocation promotes divisiveness and polarization. When losses will channel resources away from wasteful projects resources are allocated politically, individuals and groups that reduce the value of resources. When resources are get ahead by taking from others or imposing regulations allocated by political decision-making, a system of crony that provide them with an advantage relative to others. capitalism will emerge. Predictably, politicians will alloThis encourages various groups to bind together in order cate resources toward the politically powerful—those who to gain advantages relative to other groups. Thus, politi- can provide them with the most votes, campaign funds, cal allocation leads to polarization and bitterness toward high-paying jobs for political allies and, yes, even bribes. groups favored by the political process. In cases where a Unlike true entrepreneurs, crony capitalists do not create racial, religious, ethnic, or tribal group forms a majority, the wealth; instead they form a coalition with political offipolitical process is often used to oppress the minority. The cials to plunder wealth from taxpayers and other citizens. empirical studies are consistent with this view. Countries Will goods and resources be directed by markets with higher levels of economic freedom are less likely to or political officials? This is the great debate of our time. experience both internal and external use of violence. This debate highlights the importance of an accurate and objective measure of economic freedom. The index pub4  Economic freedom, entrepreneurship, and honesty in government lished in Economic Freedom of the World provides a meaEconomic freedom leads to entrepreneurial business sure that will help one track the direction of this debate, activity; political allocation leads to crony capitalism and which is sure to affect the prosperity of the world in the political corruption. When the function of government years immediately ahead.

Exhibit 1.1: Selected scholarly articles on the importance of economic freedom

1 Economic freedom and investment, income, and growth Aixala, J., and G. Fabro (2009). Economic Freedom, Civil Liberties, Political Rights and Growth: A Causality Analysis. Spanish Economic Review 11, 3: 165–178. Azman-Saini, W.N.W., A.Z. Baharumshah, and S.H. Law (2010). Foreign Direct Investment, Economic Freedom and Economic Growth: International Evidence. Economic Modelling 27, 5: 1079–1089. Berggren, Niclas (2003). The Benefits of Economic Freedom: A Survey. Public Choice 8, 2: 193–211. Bergh, A., and M. Karlsson (2010). Government Size and Growth: Accounting for Economic Freedom and Globalization. Public Choice 142, 1-2: 195–213. Carlsson, F., and S. Lundstrom (2002). Economic Freedom and Growth: Decomposing the Effects. Public Choice 112, 3-4: 335–344. Cole, Julio H. (2003). The Contribution of Economic Freedom to World Economic Growth. Cato Journal 23, 2: 189–198. Dawson, J.W. (1998). Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence. Economic Inquiry 36, 4: 603–619. de Haan, J., S. Lundstrom, and J.-E. Sturm (2006). Market-Oriented Institutions and Policies and Economic Growth: A Critical Survey. Journal of Economic Surveys 20, 2: 157–191. de Hann, J., and J.-E. Sturm (2000). On the Relationship between Economic Freedom and Growth. European Journal of Political Economy 16, 2: 215–241. Djankov, S., T. Ganser, C. McLiesh, R. Ramalho, and A. Shleifer (2010). The Effect of Corporate Taxes on Investment and Entrepreneurship. American Economic Journal-Macroeconomics 2, 3: 31–64. Fabro, G., and J. Aixala (2009). Economic Growth and Institutional Quality: Global and Income-Level Analyses. Journal of Economic Issues 43, 4: 997–1023.

Economic Freedom of the World: 2011 Annual Report  3

Faria, H.J., and H.M. Montesinos (2009). Does Economic Freedom Cause Prosperity? An IV Approach. Public Choice 141, 1-2: 103–127. Gwartney, J.D., R.G. Holcombe, and R.A. Lawson (2006). Institutions and the Impact of Investment on Growth. Kyklos 59, 2: 255–273. Gwartney, J.D., R.A. Lawson, and R.G. Holcombe (1999). Economic Freedom and the Environment for Economic Growth. Journal of Institutional and Theoretical Economics—Zeitschrift fur die Gesamte Staatswissenschaft 155, 4: 643–663. Hall, J.C., R.S. Sobel, and G.R. Crowley (2010). Institutions, Capital, and Growth. Southern Economic Journal 77, 2: 385–405. Harms, P., and H.W. Ursprung (2002). Do Civil and Political Repression Really Boost Foreign Direct Investments? Economic Inquiry 40, 4: 651–663. Heckelman, J.C., and S. Knack (2009). Aid, Economic Freedom, and Growth. Contemporary Economic Policy 27, 1: 46–53. Heckelman, J.C., and M.D. Stroup (2000). Which Economic Freedoms Contribute to Growth? Kyklos 53, 4: 527–544. Justesen, M.K. (2008). The Effect of Economic Freedom on Growth Revisited: New Evidence on Causality from a Panel of Countries 1970–1999. European Journal of Political Economy 24, 3: 642–660. Lothian, J.R. (2006). Institutions, Capital Flows and Financial Integration. Journal of International Money and Finance 25, 3: 358–369. N’Da, K., A. Robin, and T. Tribunella (2009). Economic Freedom and the Impact of Technology on Productivity. Journal of Global Information Management 17, 3: 42–58. Scully, G.W. (2002). Economic Freedom, Government Policy and the Trade-Off between Equity and Economic Growth. Public Choice 113, 1-2: 77–96.

2 Economic freedom, reductions in poverty, and improvements in human welfare Ashby, N.J. (2010). Freedom and International Migration. Southern Economic Journal 77, 1: 49–62. Bjornskov, C., A. Dreher, and J.V.A. Fischer (2008). Cross-Country Determinants of Life Satisfaction: Exploring Different Determinants across Groups in Society. Social Choice and Welfare 30, 1: 119–173. Bjornskov, C., A. Dreher, and J.V.A. Fischer (2010). Formal Institutions and Subjective Well-Being: Revisiting the CrossCountry Evidence. European Journal of Political Economy 26, 4: 419–430. Connors, Joseph (2011). Global Poverty: The Role of Economic Freedom, Democracy, and Foreign Aid. Ph.D. dissertation, Department of Economics, Florida State University. Connors, Joseph, and James D. Gwartney (2010). Economic Freedom and Global Poverty. In Mark D. White, ed., Accepting the Invisible Hand (Palgrave Macmillan): 43–68. de Soysa, I., and E. Neumayer (2005). False Prophet, or Genuine Savior? Assessing the Effects of Economic Openness on Sustainable Development, 1980–99. International Organization 59, 3: 731–772. Leeson, P. (2010). Two cheers for capitalism? Society 47, 3: 227–233. Ott, J. (2010). Greater Happiness for a Greater Number: Some Non-Controversial Options for Governments. Journal of Happiness Studies 11, 5: 631–647. Ott, J.C. (2010). Good Governance and Happiness in Nations: Technical Quality Precedes Democracy and Quality Beats Size. Journal of Happiness Studies 11, 3: 353–368. Shleifer, A. (2009). The Age of Milton Friedman. Journal of Economic Literature 47, 1: 123–135. Stroup, M.D. (2007). Economic Freedom, Democracy, and the Quality of Life. World Development 35, 1: 52–66. Stroup, M.D. (2008). Separating the Influence of Capitalism and Democracy on Women's Well-Being. Journal of Economic Behavior & Organization 67, 3-4: 560–572.

3 Economic freedom, cooperation, tolerance, and peaceful relations Burkhart, R.E. (2002). The Capitalist Political Economy and Human Rights: Cross-National Evidence. Social Science Journal 39, 2: 155–170. de Soysa, I., and H. Fjelde (2010). Is the Hidden Hand an Iron Fist? Capitalism and Civil Peace, 1970–2005. Journal of Peace Research 47, 3: 287–298. Eriksen, S., and I. de Soysa (2009). A Fate Worse than Debt? International Financial Institutions and Human Rights, 1981–2003. Journal of Peace Research 46, 4: 485–503. Gartzke, E. (2007). The Capitalist Peace. American Journal of Political Science 51, 1: 166–191.

4  Chapter 1: Economic Freedom of the World, 2009

Strong, M. (2009). Peace through Access to Entrepreneurial Capitalism for All. Journal of Business Ethics 89: 529–538. Kurrild-Klitgaard, P., M.K. Justesen, and R. Klemmensen (2006). The Political Economy of Freedom, Democracy and Transnational Terrorism. Public Choice 128, 1-2: 289–315. Steinberg, D.A., and S.M. Saideman (2008). Laissez Fear: Assessing the Impact of Government Involvement in the Economy on Ethnic Violence. International Studies Quarterly 52, 2: 235–259.

4 Economic freedom, entrepreneurship, and honesty in government Bjornskov, C., and N.J. Foss (2008). Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence. Public Choice 134, 3-4: 307–328. Carden, A., and L. Verdon (2010). When Is Corruption a Substitute for Economic Freedom? Law and Development Review 3, 1: 41–62. Dreher, A., C. Kotsogiannis, and S. McCorriston (2007). Corruption around the World: Evidence from a Structural Model. Journal of Comparative Economics 35, 3: 443–466. Freytag, A., and R. Thurik (2007). Entrepreneurship and Its Determinants in a Cross-Country Setting. Journal of Evolutionary Economics 17, 2: 117–131. Heckleman, J., and B. Powell (2010). Corruption and the Environment for Growth. Comparative Economic Studies 52, 3: 351–378. Swaleheen, M., and D. Stansel (2007). Economic Freedom, Corruption, and Growth. Cato Journal 27, 3: 343–358. Nystrom, K. (2008). The Institutions of Economic Freedom and Ewntrepreneurship: Evidence from Panel Data. Public Choice 136, 3-4: 269–282. Quinn, J.J. (2008). The Effects of Majority State Ownership of Significant Economic Sectors on Corruption: A Cross-Regional Comparison. International Interactions 34, 1: 84–128.

The Economic Freedom of the World index, 2009 The construction of the index published in Economic details can be found in the Appendix: Explanatory Notes Freedom of the World is based on three important method- and Data Sources (pp. 191). The entire data set used in the ological principles. First, objective components are always construction of the index is freely available to researchers preferred to those that involve surveys or value judgments. at <www.freetheworld.com>. Given the multi-dimensional nature of economic freedom Exhibit 1.2 indicates the structure of the EFW index. and the importance of legal and regulatory elements it is The index measures the degree of economic freedom pressometimes necessary to use data based on surveys, expert ent in five major areas: [1] Size of Government: Expenditures, panels, and generic case studies. To the fullest extent and Taxes, Enterprises; [2] Legal Structure and Security of possible, however, the index uses objective components. Property Rights; [3] Access to Sound Money; [4] Freedom Second, the data used to construct the index ratings are to Trade Internationally; [5] Regulation of Credit, Labor, from external sources such as the International Monetary and Business. Fund, World Bank, and World Economic Forum that proWithin the five major areas, there are 23 compovide data for a large number of countries. Data provided nents in this year’s index. Many of those components are directly from a source within a country are rarely used, themselves made up of several sub-components. In total, and only when the data are unavailable from international the index comprises 42 distinct variables. Each composources. Importantly, the value judgments of the authors nent and sub-component is placed on a scale from 0 to 10 or others in the Economic Freedom Network are never that reflects the distribution of the underlying data. The used to alter the raw data or the rating of any country. sub-component ratings are averaged to determine each Third, transparency is present throughout. The report pro- component. The component ratings within each area are vides information about the data sources, the methodol- then averaged to derive ratings for each of the five areas. ogy used to transform raw data into component ratings, In turn, the five area ratings are averaged to derive the and how the component ratings are used to construct both summary rating for each country. The following section the area and summary ratings. Complete methodological provides an overview of the five major areas.

Economic Freedom of the World: 2011 Annual Report  5

Exhibit 1.2: The Areas, Components, and Sub-Components of the EFW Index 1 Size of Government: Expenditures, Taxes, and Enterprises A General government consumption spending as a percentage of total consumption B Transfers and subsidies as a percentage of GDP C Government enterprises and investment D Top marginal tax rate i

Top marginal income tax rate

ii Top marginal income and payroll tax rates

2 Legal Structure and Security of Property Rights A Judicial independence (GCR) B Impartial courts (GCR) C Protection of property rights (GCR) D Military interference in rule of law and the political process (ICRG) E Integrity of the legal system (ICRG)

B Regulatory trade barriers i

Non-tariff trade barriers (GCR)

ii Compliance cost of importing & exporting (DB) C Size of trade sector relative to expected D Black-market exchange rates E International capital market controls i

Foreign ownership / investment restrictions (GCR)

ii Capital controls

5 Regulation of Credit, Labor, and Business A Credit market regulations i

Ownership of banks

ii Foreign bank competition iii Private sector credit iv Interest rate controls / negative real interest rates B Labor market regulations

F Legal enforcement of contracts (DB)

i

Hiring regulations and minimum wage (DB)

G Regulatory restrictions on the sale of real property (DB)

ii Hiring and firing regulations (GCR) iii Centralized collective bargaining (GCR)

3 Access to Sound Money A Money growth B Standard deviation of inflation C Inflation: Most recent year D Freedom to own foreign currency bank accounts

4 Freedom to Trade Internationally A Taxes on international trade i

Revenues from trade taxes (% of trade sector)

iv Hours regulations (DB) v Mandated cost of worker dismissal (DB) vi Conscription C Business regulations i

Price controls

ii Administrative requirements (GCR) iii Bureaucracy costs (GCR) iv Starting a business (DB) v Extra payments / bribes / favoritism (GCR)

ii Mean tariff rate

vi Licensing restrictions (DB)

iii Standard deviation of tariff rates

vii Cost of tax compliance (DB)

GCR = Global Competitiveness Report;  ICRG = International Country Risk Guide;  DB = Doing Business. See Appendix: Explanatory Notes and Data Sources (page 191) for bibliographical information.

6  Chapter 1: Economic Freedom of the World, 2009

Area 1: Size of Government: Expenditures, Taxes, an impartial court system. Components indicating how well and Enterprises the protective function of government is performed were The four components of Area 1 indicate the extent to which assembled from three primary sources: the International countries rely on the political process to allocate resources Country Risk Guide, the Global Competitiveness Report, and goods and services. When government spending and the World Bank’s Doing Business project. increases relative to spending by individuals, households, Security of property rights, protected by the rule and businesses, government decision-making is substituted of law, provides the foundation for both economic freefor personal choice and economic freedom is reduced. The dom and the efficient operation of markets. Freedom to first two components address this issue. Government con- exchange, for example, is meaningless if individuals do not sumption as a share of total consumption (1A) and trans- have secure rights to property, including the fruits of their fers and subsidies as a share of GDP (1B) are indicators of labor. When individuals and businesses lack confidence the size of government. When government consumption that contracts will be enforced and the fruits of their prois a larger share of the total, political choice is substituted ductive efforts protected, their incentive to engage in profor personal choice. Similarly, when governments tax some ductive activity is eroded. Perhaps more than any other area, people in order to provide transfers to others, they reduce this area is essential for the efficient allocation of resources. the freedom of individuals to keep what they earn. Countries with major deficiencies in this area are unlikely The third component (1C) in this area measures to prosper regardless of their policies in the other four areas. the extent to which countries use private rather than government enterprises to produce goods and services. Area 3: Access to Sound Money Government firms play by rules that are different from Money oils the wheels of exchange. An absence of sound those to which private enterprises are subject. They are money undermines gains from trade. As Milton Friedman not dependent on consumers for their revenue or on informed us long ago, inflation is a monetary phenominvestors for capital. They often operate in protected mar- enon, caused by too much money chasing too few goods. kets. Thus, economic freedom is reduced as government High rates of monetary growth invariably lead to inflation. enterprises produce a larger share of total output. Similarly, when the rate of inflation increases, it also tends The fourth component (1D) is based on (1Di) the top to become more volatile. High and volatile rates of inflamarginal income tax rate and (1Dii) the top marginal income tion distort relative prices, alter the fundamental terms of and payroll tax rate and the income threshold at which long-term contracts, and make it virtually impossible for these rates begin to apply. These two sub-components are individuals and businesses to plan sensibly for the future. averaged to calculate the top marginal tax rate (1D). High Sound money is essential to protect property rights and, marginal tax rates that apply at relatively low income levels thus, economic freedom. Inflation erodes the value of are also indicative of reliance upon government. Such rates property held in monetary instruments. When governdeny individuals the fruits of their labor. Thus, countries ments finance their expenditures by creating money, in with high marginal tax rates and low income thresholds effect, they are expropriating the property and violating are rated lower. the economic freedom of their citizens. Taken together, the four components of Area 1 The important thing is that individuals have access measure the degree to which a country relies on personal to sound money: who provides it makes little difference. choice and markets rather than government budgets and Thus, in addition to data on a country’s inflation and its political decision-making. Therefore, countries with low government’s monetary policy, it is important to consider levels of government spending as a share of the total, a how difficult it is to use alternative, more credible, cursmaller government enterprise sector, and lower marginal rencies. If bankers can offer saving and checking accounts tax rates earn the highest ratings in this area. in other currencies or if citizens can open foreign bank accounts, then access to sound money is increased and Area 2: Legal Structure and Security of Property Rights economic freedom expanded. Protection of persons and their rightfully acquired property There are four components in Area 3 of the EFW is a central element of economic freedom and a civil society. index. All of them are objective and relatively easy to Indeed, it is the most important function of government. obtain and all have been included in the earlier editions Area 2 focuses on this issue. The key ingredients of a legal of the index. The first three are designed to measure the system consistent with economic freedom are rule of law, consistency of monetary policy (or institutions) with security of property rights, an independent judiciary, and long-term price stability. Component 3D is designed to

Economic Freedom of the World: 2011 Annual Report  7

measure the ease with which other currencies can be used via domestic and foreign bank accounts. In order to earn a high rating in this area, a country must follow policies and adopt institutions that lead to low (and stable) rates of inflation and avoid regulations that limit the ability to use alternative currencies.

indicate the extent to which credit is supplied to the private sector and whether controls on interest rates interfere with the market in credit. Countries that use a private banking system to allocate credit to private parties and refrain from controlling interest rates receive higher ratings for this regulatory component. Many types of labor-market regulations infringe on the economic freedom of employees and employers. Among the more prominent are minimum wages, dismissal regulations, setting of wages by a centralized agency, extension of union contracts to non-participating parties, and military conscription. The labor-market component (5B) is designed to measure the extent to which these restraints upon economic freedom are present. In order to earn high marks in the component rating regulation of the labor market, a country must allow market forces to determine wages and establish the conditions of hiring and firing, and refrain from the use of conscription. Like the regulation of credit and labor markets, the regulation of business activities (5C) inhibits economic freedom. The sub-components of 5C are designed to identify the extent to which regulations and bureaucratic procedures restrain entry and reduce competition. In order to earn a high score in this portion of the index, countries must allow markets to determine prices and refrain from regulatory activities that retard entry into business and increase the cost of producing products. They also must refrain from “playing favorites,� that is, from using their power to extract financial payments and reward some businesses at the expense of others.

Area 4: Freedom to Trade Internationally In our modern world of high technology and low costs for communication and transportation, freedom of exchange across national boundaries is a key ingredient of economic freedom. Many goods and services are now either produced abroad or contain resources supplied from abroad. Voluntary exchange is a positive-sum activity: both trading partners gain and the pursuit of the gain provides the motivation for the exchange. Thus, freedom to trade internationally also contributes substantially to our modern living standards. In response to protectionist critics and specialinterest politics, virtually all countries adopt trade restrictions of various types. Tariffs and quotas are obvious examples of roadblocks that limit international trade. Because they reduce the convertibility of currencies, controls on the exchange rate also hinder international trade. The volume of trade is also reduced if the passage of goods through customs is onerous and time consuming. Sometimes these delays are the result of administrative inefficiency while in other instances they reflect the actions of corrupt officials seeking to extract bribes. In both cases, economic freedom is reduced. The components in this area are designed to measure a wide variety of restraints that affect international Construction of Summary and Area ratings exchange: tariffs, quotas, hidden administrative restraints, Theory provides us with direction regarding elements that and exchange rate and capital controls. In order to get a should be included in the five areas and the summary index, high rating in this area, a country must have low tariffs, but it does not indicate what weights should be attached a trade sector larger than expected, easy clearance and to the components within the areas or among the areas in efficient administration of customs, a freely convertible the construction of the summary index. It would be nice if currency, and few controls on the movement of capital. these factors were independent of each other and a weight could be attached to each of them. During the past several Area 5: Regulation of Credit, Labor, and Business years, we have investigated several methods of weighting When regulations restrict entry into markets and inter- the various components, including principle component fere with the freedom to engage in voluntary exchange, analysis and a survey of economists. We have also invited they reduce economic freedom. The fifth area of the index others to use their own weighting structure if they believe focuses on regulatory restraints that limit the freedom of that it is preferable. In the final analysis, the summary index exchange in credit, labor, and product markets. The first is not very sensitive to substantial variations in the weights. component (5A) reflects conditions in the domestic credit Furthermore, there is reason to question whether market. The first two sub-components provide evidence the areas (and components) are independent or work on the extent to which the banking industry is dominated together as a team. Put another way, they may be linked by private firms and whether foreign banks are permitted more like the wheels, motor, transmission, drive shaft, and to compete in the market. The final two sub-components frame of a car. Just as it is the bundle of these factors that

8  Chapter 1: Economic Freedom of the World, 2009

underlies the mobility of an auto, it may be a bundle of factors that underlies the composition of economic freedom. With regard to an automobile, which is more important for mobility: the motor, wheels, or transmission? The question cannot be easily answered because the parts work together. If any of these key parts break down, the car is immobile. Institutional quality may be much the same. If any of the key parts are absent, the overall effectiveness is undermined.

As the result of these two considerations, we organize the elements of the index in a manner that seems sensible to us but we make no attempt to weight the components in any special way when deriving either area or summary ratings. Of course, the data for the components and sub-components are available to researchers who would like to consider alternative weighting schemes and we encourage them to do so.

Summary Economic Freedom Ratings, 2009 Exhibit 1.3 presents summary economic freedom ratings, sorted from highest to lowest. These ratings are for the year 2009, the most recent year for which comprehensive data are available. Hong Kong and Singapore, once again, occupy the top two positions. The other nations in the top 10 are New Zealand, Switzerland, Australia, Canada, Chile, United Kingdom, Mauritius, and the United States. The rankings of other major countries include Germany (21st), Japan (22nd), Korea (30th), France (42nd), Spain (54th), Italy (70th), Mexico (75th), Russia (81st), China (92nd), India (94th), and Brazil (102nd). The ten lowest-rated

countries are Chad, Burundi, Republic of Congo, GuineaBissau, Central African Republic, Democratic Republic of Congo, Angola, Venezuela, Myanmar, and, again in last place, Zimbabwe. The EFW index is calculated back to 1970 as the availability of data allows; see the Country Data Tables in chapter 2 or our website, <http://www.freetheworld.com>, for information from past years. Because some data for earlier years may have been updated or corrected, researchers are always encouraged to use the data from the most recent annual report to assure the best-quality data.

Area Economic Freedom Ratings (and Rankings), 2009 Exhibit 1.4 presents the ratings (and, in parentheses, the rankings) for each of the five areas of the index and for components 5A, 5B, and 5C. A number of interesting patterns emerge from an analysis of these datas. Highincome industrial economies generally rank quite high for Legal Structure and Security of Property Rights (Area 2), Access to Sound Money (Area 3), and Freedom to Trade Internationally (Area 4). Their ratings were lower, however, for Size of Government: Expenditures, Taxes, and Enterprises (Area 1) and Regulation of Credit, Labor, and Business (Area 5). This was particularly true for western European countries. On the other hand, a number of developing nations have a small fiscal size of government, but rate poorly in other areas. Madagascar and Togo illustrate this point. Madagascar ranks fourth and Togo second for size of government (Area 1). However, Madagascar ranks 132nd in Area 2, 89th in Area 4, 126th in Area 5, and its summary rating places it 96th. In a similar fashion, Togo ranks 139th in Area 2, 109th in Area 4, 140th in Area 5, and its overall summary ranking is 123rd. Clearly, a small size

of government is insufficient for the provision of economic freedom. The institutions of economic freedom, such as the rule of law and property rights, as well as sound money, trade openness, and sensible regulation are also required. Weakness in the rule of law and property rights is particularly pronounced in sub-Saharan Africa, among Islamic nations, and for several nations that were part of the former Soviet bloc, though some of these nations have made strides toward improvement. Many Latin American and Southeast Asian nations also score poorly for rule of law and property rights. The nations that rank poorly in this category also tend to score poorly in the trade and regulation areas, even though several have reasonably sized governments and sound money. The economies most open to foreign trade are Hong Kong and Singapore, while the most closed economies are Myanmar and Venezuela. The least regulated countries—those at the top in Regulation of Credit, Labor, and Business (Area 5)—are a diverse lot: Belize, Bahamas, Hong Kong, Fiji, New Zealand, and Singapore.

Economic Freedom of the World: 2011 Annual Report  9

Exhibit 1.3: Summary Economic Freedom Ratings, 2009 0

Hong Kong 1 Singapore 2 New Zealand 3 Switzerland 4 Australia 5 Canada 6 Chile 7 United Kingdom 8 Mauritius 9 United States 10 Bahrain 11 Finland 11 Slovak Republic 13 United Arab Emirates 14 Denmark 15 Estonia 15 Hungary 15 Cyprus 18 Austria 19 Luxembourg 20 Germany 21 Japan 22 Panama 23 Lithuania 24 Ireland 25 Taiwan 26 Georgia 27 Bulgaria 28 Oman 28 Albania 30 Korea, South 30 Netherlands 30 Malta 33 Peru 33 Norway 35 Mongolia 36 Montenegro 37 Zambia 38 Sweden 39 Bahamas 40 Costa Rica 41 France 42 Armenia 43 Belgium 43 El Salvador 43 Czech Republic 46 Kuwait 47 Romania 48 Guatemala 49 Jamaica 49 Honduras 51 Uganda 52 Poland 53 Spain 54 Trinidad & Tobago 54 Kazakhstan 56 Kenya 56 Belize 58 Portugal 59 Latvia 60 Papua New Guinea 61 Jordan 62 Uruguay 62 Macedonia 64 Thailand 65 Namibia 66 Haiti 67 Botswana 68 Nicaragua 69 Ghana 70 Iceland 70

2

4

6

8

10

9.01 8.68 8.20 8.03 7.98 7.81 7.77 7.71 7.67 7.60 7.59 7.59 7.56 7.54 7.52 7.52 7.52 7.51 7.50 7.49 7.45 7.44 7.41 7.40 7.38 7.37 7.36 7.34 7.34 7.32 7.32 7.32 7.31 7.31 7.30 7.29 7.27 7.26 7.24 7.22 7.17 7.16 7.15 7.15 7.15 7.13 7.10 7.08 7.07 7.07 7.06 7.01 7.00 6.99 6.99 6.97 6.97 6.95 6.93 6.92 6.91 6.90 6.90 6.88 6.87 6.86 6.84 6.83 6.82 6.81 6.81

0

Italy 70 Kyrgyz Republic 70 Slovenia 74 Mexico 75 Turkey 75 Fiji 77 Dominican Republic 78 Malaysia 78 Paraguay 80 Greece 81 Russia 81 Israel 83 Azerbaijan 84 Barbados 84 Indonesia 84 South Africa 87 Vietnam 88 Croatia 89 Philippines 89 Serbia 91 China 92 Egypt 93 India 94 Tunisia 94 Madagascar 96 Moldova 96 Rwanda 96 Bolivia 99 Bosnia & Herzegovina 100 Colombia 101 Brazil 102 Bangladesh 103 Malawi 103 Iran 105 Morocco 105 Nigeria 107 Sri Lanka 107 Lesotho 109 Guyana 110 Mauritania 111 Ecuador 112 Tanzania 112 Pakistan 114 Mali 115 Cameroon 115 Benin 117 Burkina Faso 118 Argentina 119 Côte d’Ivoire 120 Syria 121 Gabon 122 Togo 123 Senegal 124 Ukraine 125 Ethiopia 126 Sierra Leone 126 Mozambique 128 Nepal 129 Niger 130 Algeria 131 Chad 132 Burundi 133 Congo, Republic of 134 Guinea-Bissau 135 Central African Rep. 136 Congo, Dem. Rep. of 137 Angola 138 Venezuela 139 Myanmar 140 Zimbabwe 141

2

4

6

8

10

6.81 6.81 6.78 6.74 6.74 6.71 6.68 6.68 6.57 6.55 6.55 6.53 6.50 6.50 6.50 6.49 6.48 6.46 6.46 6.44 6.43 6.42 6.40 6.40 6.29 6.29 6.29 6.27 6.23 6.21 6.19 6.17 6.17 6.16 6.16 6.12 6.12 6.11 6.10 6.05 6.04 6.04 6.03 5.98 5.97 5.96 5.94 5.90 5.86 5.83 5.82 5.74 5.73 5.70 5.62 5.62 5.53 5.50 5.44 5.36 5.32 5.12 5.04 5.03 4.88 4.84 4.76 4.28 4.16 4.08

10  Chapter 1: Economic Freedom of the World, 2009

Exhibit 1.4: Area Economic Freedom Ratings (Ranks), 2009

1 Size of Government

2 Legal System & Property Rights

Rating (Rank)

Rating (Rank)

Albania

8.2 (8)

Algeria

AREAS 3 Sound Money

COMPONENTS OF AREA 5 5A 5B 5C Credit Market Labor Market Business Regulation Regulations Regulations

4 Freedom to Trade Internationally

5 Regulation

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

5.4 (79)

9.6 (6)

6.6 (72)

6.7 (83)

8.1 (78)

5.9 (86)

6.1 (55)

3.6 (138)

4.6 (100)

7.0 (105)

6.3 (94)

5.4 (131)

5.5 (136)

5.3 (111)

5.3 (105)

Angola

3.5 (139)

3.3 (130)

5.2 (139)

6.4 (85)

5.4 (133)

7.2 (114)

3.9 (136)

5.0 (118)

Argentina

6.2 (77)

4.5 (105)

7.0 (102)

5.8 (112)

6.0 (116)

8.2 (75)

5.3 (108)

4.4 (130)

Armenia

7.7 (21)

5.5 (78)

9.4 (30)

6.5 (79)

6.7 (86)

8.1 (83)

6.2 (77)

5.7 (88)

Australia

6.7 (58)

8.2 (11)

9.6 (9)

7.1 (38)

8.2 (9)

9.5 (14)

8.4 (16)

6.8 (25)

Austria

4.8 (119)

8.3 (9)

9.6 (14)

7.3 (26)

7.4 (34)

9.2 (33)

6.2 (79)

6.8 (20)

Azerbaijan

5.4 (106)

6.0 (54)

7.8 (87)

6.4 (80)

6.9 (66)

7.8 (96)

6.8 (60)

6.2 (51)

Bahamas

8.3 (7)

7.0 (28)

7.2 (98)

4.8 (135)

8.9 (2)

9.8 (8)

9.4 (3)

7.4 (8)

Bahrain

6.6 (62)

6.6 (37)

9.0 (50)

7.5 (21)

8.3 (7)

9.3 (28)

8.7 (8)

7.0 (16)

Bangladesh

8.1 (12)

3.6 (128)

6.7 (114)

5.7 (118)

6.8 (78)

8.1 (77)

6.5 (68)

5.7 (89)

Barbados

5.6 (96)

7.8 (18)

6.7 (117)

5.1 (128)

7.3 (44)

8.5 (62)

7.6 (35)

5.9 (77)

Belgium

4.1 (135)

6.8 (31)

9.6 (5)

7.7 (15)

7.5 (30)

8.9 (46)

7.4 (45)

6.3 (45)

Belize

6.6 (61)

5.5 (75)

8.3 (68)

5.4 (123)

8.9 (1)

9.4 (23)

9.3 (4)

8.1 (1)

Benin

7.0 (39)

4.4 (106)

6.7 (115)

5.0 (133)

6.6 (88)

9.2 (32)

5.8 (91)

4.8 (123)

Bolivia

6.3 (75)

3.8 (125)

8.7 (57)

6.8 (59)

5.7 (123)

8.0 (85)

4.6 (124)

4.5 (129)

Bosnia & Herzeg.

5.5 (103)

3.9 (121)

8.3 (69)

6.5 (77)

6.9 (65)

8.7 (58)

6.6 (66)

5.4 (99)

Botswana

4.4 (132)

6.9 (30)

8.4 (66)

6.7 (63)

7.8 (18)

9.5 (14)

7.2 (51)

6.6 (32)

Brazil

6.7 (59)

5.3 (82)

7.9 (84)

6.0 (105)

5.1 (136)

6.6 (124)

4.4 (130)

4.2 (132)

Bulgaria

7.3 (31)

5.1 (85)

9.4 (29)

7.2 (36)

7.7 (23)

9.7 (12)

7.8 (28)

5.5 (97)

Burkina Faso

6.4 (71)

4.1 (117)

6.7 (113)

5.2 (127)

7.3 (51)

8.5 (63)

7.2 (50)

6.0 (64)

Burundi

4.6 (124)

3.2 (133)

6.8 (110)

4.4 (138)

6.6 (90)

6.6 (125)

8.2 (20)

5.1 (115)

Cameroon

6.8 (51)

3.6 (126)

6.6 (120)

6.0 (103)

6.8 (79)

8.0 (85)

7.6 (38)

4.7 (126)

Canada

6.1 (80)

8.1 (15)

9.6 (19)

6.9 (51)

8.3 (8)

9.2 (31)

8.5 (12)

7.1 (12)

Central African Rep.

6.3 (73)

2.0 (141)

7.0 (100)

3.9 (139)

5.0 (137)

7.3 (110)

3.8 (138)

4.1 (133)

Chad

6.9 (43)

2.7 (136)

5.7 (134)

6.0 (104)

5.3 (135)

6.1 (128)

6.0 (83)

3.7 (139)

Chile

7.7 (23)

7.2 (25)

9.0 (51)

7.8 (9)

7.2 (55)

8.7 (56)

5.8 (93)

7.1 (13)

China

4.5 (128)

6.4 (45)

8.0 (79)

7.2 (30)

6.0 (115)

7.4 (106)

5.5 (103)

5.0 (119)

Colombia

6.0 (84)

4.4 (108)

8.1 (76)

5.7 (120)

6.9 (72)

8.5 (67)

5.9 (89)

6.2 (49)

Congo, Dem. Rep.

5.2 (110)

2.7 (137)

7.0 (107)

4.6 (136)

4.8 (139)

4.8 (139)

5.7 (98)

4.0 (134)

Congo, Rep. of

5.0 (115)

4.2 (115)

4.7 (140)

5.7 (119)

5.6 (127)

6.3 (127)

6.4 (73)

4.0 (135)

Costa Rica

7.4 (30)

6.5 (39)

7.9 (86)

7.3 (27)

6.9 (70)

7.6 (99)

6.7 (64)

6.4 (43)

Côte d’Ivoire

7.0 (40)

3.2 (135)

6.6 (119)

6.2 (97)

6.3 (106)

8.0 (85)

5.7 (97)

5.2 (107)

Croatia

5.1 (111)

5.6 (74)

8.5 (64)

6.3 (91)

6.8 (75)

8.9 (48)

6.4 (72)

5.1 (114)

Cyprus

7.3 (32)

6.8 (32)

9.4 (31)

6.7 (67)

7.3 (49)

9.5 (14)

6.3 (74)

6.1 (58)

Czech Republic

4.9 (118)

6.4 (44)

9.5 (27)

7.6 (18)

7.3 (46)

8.7 (54)

7.6 (36)

5.6 (92)

Economic Freedom of the World: 2011 Annual Report  11

Exhibit 1.4 (continued): Area Economic Freedom Ratings (Ranks), 2009

1 Size of Government

2 Legal System & Property Rights

Rating (Rank)

Rating (Rank)

AREAS 3 Sound Money

COMPONENTS OF AREA 5 5A 5B 5C Credit Market Labor Market Business Regulation Regulations Regulations

4 Freedom to Trade Internationally

5 Regulation

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Denmark

4.1 (134)

8.5 (4)

9.5 (24)

7.4 (23)

8.1 (11)

9.3 (27)

7.5 (41)

7.4 (6)

Dominican Rep.

7.7 (20)

4.8 (93)

8.1 (77)

6.4 (87)

6.5 (98)

7.4 (104)

6.3 (75)

5.8 (85)

Ecuador

7.9 (14)

4.0 (119)

6.4 (125)

6.2 (98)

5.8 (120)

8.0 (90)

4.1 (135)

5.3 (102)

Egypt

6.0 (85)

5.5 (77)

8.7 (60)

6.4 (82)

5.6 (124)

6.0 (130)

5.0 (121)

5.8 (86)

El Salvador

8.9 (3)

4.4 (109)

9.3 (36)

6.5 (75)

6.7 (81)

8.7 (59)

5.0 (120)

6.5 (37)

Estonia

5.5 (102)

7.2 (26)

9.5 (22)

7.8 (10)

7.7 (22)

9.9 (5)

5.9 (87)

7.2 (11)

Ethiopia

6.0 (87)

5.2 (83)

5.7 (132)

5.0 (129)

6.2 (108)

4.4 (140)

7.6 (37)

6.5 (38)

Fiji

7.0 (42)

5.8 (62)

6.8 (112)

5.3 (126)

8.7 (4)

10.0 (1)

9.0 (6)

7.3 (10)

Finland

5.2 (109)

8.7 (3)

9.6 (18)

7.2 (35)

7.4 (40)

9.8 (9)

5.5 (100)

6.8 (21)

France

4.7 (123)

7.5 (22)

9.7 (4)

7.1 (41)

6.9 (71)

8.4 (71)

5.9 (88)

6.3 (46)

Gabon

6.0 (83)

4.4 (112)

5.7 (133)

5.8 (110)

7.2 (53)

7.5 (102)

8.7 (9)

5.4 (98)

Georgia

7.8 (15)

5.1 (86)

9.2 (40)

7.4 (24)

7.2 (56)

6.8 (119)

7.5 (40)

7.4 (7)

Germany

5.4 (105)

8.2 (14)

9.5 (21)

7.5 (20)

6.6 (92)

8.0 (89)

5.3 (112)

6.6 (33)

Ghana

6.7 (55)

5.5 (76)

8.2 (72)

6.9 (57)

6.7 (82)

7.8 (93)

6.2 (78)

6.1 (57)

Greece

6.0 (88)

5.6 (71)

9.6 (8)

6.1 (101)

5.4 (129)

6.0 (132)

4.5 (128)

5.8 (87)

Guatemala

7.8 (19)

4.6 (98)

9.4 (32)

7.2 (33)

6.4 (103)

8.6 (60)

4.5 (126)

6.0 (69)

Guinea-Bissau

4.3 (133)

3.3 (131)

6.3 (126)

5.0 (130)

6.3 (105)

9.3 (25)

3.8 (137)

5.8 (83)

Guyana

3.8 (137)

4.8 (92)

7.9 (83)

6.6 (73)

7.4 (42)

8.1 (81)

7.8 (27)

6.2 (48)

Haiti

8.5 (6)

2.5 (140)

8.6 (61)

6.9 (58)

7.6 (25)

8.6 (61)

9.7 (1)

4.7 (127)

Honduras

8.2 (9)

4.3 (113)

9.2 (41)

7.1 (42)

6.5 (99)

8.0 (84)

5.0 (119)

6.4 (40)

Hong Kong

9.4 (1)

8.2 (13)

9.3 (35)

9.3 (2)

8.8 (3)

9.3 (26)

9.5 (2)

7.8 (3)

Hungary

6.2 (79)

6.5 (40)

9.5 (20)

7.9 (8)

7.4 (35)

8.8 (51)

7.3 (46)

6.1 (56)

Iceland

5.0 (114)

8.3 (7)

7.8 (88)

5.4 (125)

7.6 (28)

7.3 (112)

7.8 (25)

7.6 (4)

India

6.7 (57)

5.7 (67)

6.6 (121)

6.5 (76)

6.5 (97)

6.7 (123)

7.9 (23)

4.9 (121)

Indonesia

7.6 (26)

4.4 (107)

7.7 (91)

6.7 (65)

6.1 (112)

8.1 (80)

4.8 (122)

5.3 (101)

Iran

6.5 (67)

5.8 (64)

8.2 (75)

5.0 (134)

5.4 (130)

6.7 (122)

4.4 (131)

5.2 (110)

Ireland

4.6 (125)

7.8 (17)

9.1 (46)

8.3 (4)

7.0 (60)

6.5 (126)

7.8 (30)

6.8 (24)

Israel

4.6 (127)

6.0 (53)

8.8 (55)

7.1 (45)

6.2 (107)

7.0 (117)

5.3 (109)

6.4 (41)

Italy

5.3 (108)

5.8 (63)

9.6 (12)

6.9 (55)

6.6 (94)

7.5 (103)

6.8 (62)

5.5 (96)

Jamaica

8.7 (5)

5.4 (80)

8.2 (73)

6.1 (102)

6.9 (69)

7.3 (113)

7.7 (32)

5.7 (91)

Japan

6.5 (68)

7.5 (21)

9.8 (1)

5.8 (114)

7.7 (19)

8.9 (47)

8.4 (18)

6.0 (70)

Jordan

4.4 (130)

6.3 (47)

9.3 (38)

7.2 (32)

7.4 (43)

7.3 (107)

8.4 (15)

6.3 (44)

Kazakhstan

6.8 (49)

5.9 (58)

8.3 (71)

6.2 (95)

7.5 (31)

9.3 (24)

7.2 (53)

6.1 (54)

Kenya

7.7 (22)

4.6 (101)

8.6 (62)

6.7 (66)

7.3 (50)

8.4 (73)

7.8 (26)

5.7 (90)

Korea, South

6.8 (50)

6.6 (36)

9.5 (26)

7.1 (40)

6.6 (93)

9.3 (28)

4.4 (129)

6.0 (63)

Kuwait

5.1 (112)

7.0 (27)

9.3 (39)

6.2 (100)

8.0 (13)

7.3 (48)

6.6 (34)

10.0 (1)

12  Chapter 1: Economic Freedom of the World, 2009

Exhibit 1.4 (continued): Area Economic Freedom Ratings (Ranks), 2009

1 Size of Government

2 Legal System & Property Rights

Rating (Rank)

Rating (Rank)

Kyrgyz Republic

7.1 (37)

Latvia

AREAS 3 Sound Money

COMPONENTS OF AREA 5 5A 5B 5C Credit Market Labor Market Business Regulation Regulations Regulations

4 Freedom to Trade Internationally

5 Regulation

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

4.7 (95)

8.2 (74)

6.7 (68)

7.4 (41)

9.0 (37)

6.4 (71)

6.7 (28)

4.8 (120)

6.4 (43)

8.9 (53)

7.1 (44)

7.4 (38)

8.9 (45)

7.2 (54)

6.1 (61)

Lesotho

4.4 (129)

4.6 (99)

7.7 (92)

6.4 (81)

7.4 (39)

9.8 (9)

7.1 (55)

5.3 (104)

Lithuania

6.7 (54)

6.5 (41)

9.2 (45)

6.9 (53)

7.7 (21)

9.5 (20)

7.1 (56)

6.5 (35)

Luxembourg

4.4 (131)

8.3 (10)

9.6 (17)

8.0 (7)

7.3 (48)

9.4 (21)

5.5 (102)

7.0 (15)

Macedonia

6.9 (46)

5.0 (90)

8.0 (82)

6.7 (70)

7.9 (17)

9.1 (35)

7.9 (24)

6.6 (31)

Madagascar

8.8 (4)

3.2 (132)

7.5 (93)

6.3 (89)

5.6 (126)

5.6 (134)

5.2 (113)

5.9 (79)

Malawi

5.7 (92)

5.6 (73)

7.0 (106)

5.7 (117)

6.9 (68)

7.8 (94)

7.0 (59)

5.8 (82)

Malaysia

5.5 (101)

6.5 (38)

6.5 (124)

7.2 (29)

7.6 (26)

9.0 (40)

7.8 (31)

6.1 (59)

Mali

6.4 (70)

4.4 (111)

6.8 (111)

5.9 (108)

6.5 (100)

8.0 (88)

5.5 (101)

5.9 (75)

Malta

5.8 (90)

7.5 (20)

9.5 (28)

7.0 (50)

6.9 (67)

8.5 (65)

7.7 (33)

4.5 (128)

Mauritania

6.5 (66)

4.5 (103)

5.6 (136)

6.4 (86)

7.2 (52)

9.2 (34)

7.1 (57)

5.4 (100)

Mauritius

7.8 (18)

6.3 (46)

9.2 (44)

7.2 (34)

7.9 (15)

9.5 (14)

7.5 (42)

6.7 (29)

Mexico

6.8 (48)

5.1 (89)

8.0 (81)

6.9 (54)

7.0 (62)

9.9 (6)

5.5 (104)

5.6 (93)

Moldova

5.6 (97)

5.6 (70)

7.7 (89)

6.3 (88)

6.1 (110)

7.7 (97)

5.4 (106)

5.3 (103)

Mongolia

7.6 (24)

5.7 (68)

8.0 (80)

7.5 (19)

7.6 (29)

9.0 (41)

7.2 (49)

6.5 (39)

Montenegro

6.0 (86)

6.1 (52)

9.5 (25)

6.8 (62)

8.0 (12)

9.8 (7)

8.3 (19)

5.9 (71)

Morocco

6.3 (72)

5.9 (56)

7.0 (104)

6.0 (106)

5.6 (125)

6.8 (119)

4.1 (134)

5.9 (80)

Mozambique

4.7 (121)

4.1 (116)

6.5 (122)

6.3 (92)

6.0 (114)

9.0 (42)

3.1 (140)

6.0 (68)

Myanmar

6.3 (73)

3.2 (134)

5.7 (135)

1.3 (141)

4.3 (141)

3.9 (141)

Namibia

6.5 (63)

7.5 (19)

6.1 (129)

6.2 (96)

7.9 (14)

7.7 (34)

6.1 (53)

Nepal

6.1 (81)

3.9 (124)

6.1 (128)

5.4 (124)

6.0 (117)

6.9 (118)

5.9 (90)

5.2 (112)

Netherlands

3.4 (140)

8.1 (16)

9.5 (23)

8.1 (6)

7.4 (36)

9.0 (43)

6.7 (63)

6.5 (36)

New Zealand

6.1 (82)

8.8 (1)

9.7 (2)

7.7 (13)

8.7 (5)

8.5 (11)

7.6 (5)

Nicaragua

7.0 (41)

4.4 (110)

8.7 (58)

7.0 (47)

7.0 (61)

8.4 (68)

6.8 (61)

5.8 (84)

Niger

6.7 (56)

4.2 (114)

6.5 (123)

4.5 (137)

5.3 (134)

7.7 (98)

3.3 (139)

4.9 (122)

Nigeria

7.1 (38)

3.9 (122)

6.2 (127)

6.3 (93)

7.2 (54)

8.9 (44)

8.4 (17)

4.3 (131)

Norway

4.9 (116)

8.8 (2)

9.2 (42)

6.5 (78)

7.1 (59)

9.5 (14)

5.1 (117)

6.6 (30)

Oman

5.6 (99)

7.4 (23)

8.9 (54)

7.2 (37)

7.7 (20)

7.4 (105)

8.8 (7)

6.9 (18)

Pakistan

8.0 (13)

4.0 (118)

6.0 (130)

5.7 (116)

6.4 (102)

8.5 (66)

5.6 (99)

5.2 (106)

Panama

7.8 (16)

5.1 (87)

9.1 (48)

8.2 (5)

6.8 (76)

9.3 (28)

5.3 (110)

5.9 (76)

Papua New Guinea

7.2 (33)

4.7 (96)

7.0 (101)

7.7 (12)

7.9 (16)

8.2 (76)

8.6 (10)

6.8 (22)

Paraguay

7.4 (28)

3.6 (127)

8.7 (59)

7.2 (31)

5.9 (119)

7.3 (109)

4.3 (132)

6.0 (67)

Peru

7.6 (27)

5.4 (81)

9.2 (43)

7.5 (22)

6.9 (73)

7.3 (108)

7.3 (47)

5.9 (73)

Philippines

7.8 (17)

4.6 (102)

6.8 (109)

6.5 (74)

6.6 (87)

8.8 (52)

6.0 (84)

5.2 (113)

Poland

5.6 (95)

6.3 (48)

9.3 (33)

6.8 (60)

6.9 (64)

8.4 (69)

7.5 (43)

5.0 (120)

10.0 (1)

10.0 (1)

Economic Freedom of the World: 2011 Annual Report  13

Exhibit 1.4 (continued): Area Economic Freedom Ratings (Ranks), 2009

1 Size of Government

2 Legal System & Property Rights

Rating (Rank)

Rating (Rank)

AREAS 3 Sound Money

4 Freedom to Trade Internationally

5 Regulation

Rating (Rank)

Rating (Rank)

Rating (Rank)

COMPONENTS OF AREA 5 5A 5B 5C Credit Market Labor Market Business Regulation Regulations Regulations Rating (Rank)

Rating (Rank)

Rating (Rank)

Portugal

5.6 (100)

6.7 (35)

9.6 (10)

7.1 (46)

5.7 (122)

6.1 (129)

5.2 (116)

5.9 (72)

Romania

6.3 (76)

5.9 (61)

9.0 (49)

7.4 (25)

6.8 (74)

7.5 (101)

7.0 (58)

5.9 (74)

Russia

6.8 (52)

5.7 (66)

8.3 (70)

5.8 (111)

6.1 (111)

8.3 (74)

6.1 (81)

4.0 (136)

Rwanda

5.6 (98)

6.2 (50)

7.5 (94)

5.0 (131)

7.1 (58)

6.0 (131)

8.5 (13)

6.8 (23)

Senegal

5.4 (104)

3.9 (123)

7.0 (103)

6.2 (99)

6.2 (109)

8.8 (50)

4.6 (125)

5.1 (117)

Serbia

6.9 (47)

4.7 (97)

7.7 (90)

6.3 (90)

6.6 (89)

9.1 (36)

5.7 (94)

5.1 (116)

Sierra Leone

5.9 (89)

3.9 (120)

7.5 (95)

5.0 (132)

5.7 (121)

5.7 (133)

5.4 (105)

6.2 (50)

Singapore

8.1 (11)

8.3 (8)

9.1 (47)

9.4 (1)

8.5 (6)

9.8 (9)

7.8 (29)

8.0 (2)

Slovak Republic

6.4 (69)

6.0 (55)

9.7 (3)

8.3 (3)

7.3 (45)

9.4 (22)

7.4 (44)

5.2 (108)

Slovenia

4.6 (126)

6.2 (49)

9.6 (7)

6.7 (64)

6.7 (80)

8.4 (72)

6.0 (85)

5.9 (78)

South Africa

5.0 (113)

6.2 (51)

7.9 (85)

6.4 (84)

7.0 (63)

8.7 (57)

6.1 (80)

6.1 (60)

Spain

5.6 (94)

6.5 (42)

9.6 (15)

6.9 (56)

6.4 (101)

8.4 (70)

5.0 (118)

5.8 (81)

Sri Lanka

6.7 (60)

5.1 (88)

6.7 (116)

5.7 (121)

6.5 (96)

7.5 (100)

6.5 (69)

5.5 (95)

Sweden

3.2 (141)

8.4 (5)

9.6 (16)

7.6 (17)

7.3 (47)

9.5 (14)

5.4 (107)

7.1 (14)

Switzerland

7.6 (25)

8.4 (6)

9.3 (34)

6.6 (71)

8.1 (10)

9.0 (38)

8.5 (14)

7.0 (17)

Syria

6.2 (78)

4.5 (104)

7.3 (97)

5.8 (113)

5.4 (132)

4.8 (137)

6.1 (82)

5.2 (111)

Taiwan

6.9 (44)

6.7 (34)

9.3 (37)

7.2 (28)

6.7 (85)

8.5 (64)

5.2 (115)

6.4 (42)

Tanzania

4.7 (122)

5.9 (59)

7.5 (96)

5.7 (115)

6.3 (104)

7.9 (91)

5.8 (92)

5.2 (109)

Thailand

7.1 (36)

5.7 (65)

7.1 (99)

7.7 (16)

6.8 (77)

8.7 (55)

5.7 (96)

6.0 (66)

Togo

9.0 (2)

2.6 (139)

6.6 (118)

5.9 (109)

4.6 (140)

4.8 (138)

4.2 (133)

4.8 (124)

Trinidad & Tobago

7.4 (29)

5.2 (84)

8.1 (78)

6.8 (61)

7.5 (32)

8.8 (53)

7.5 (39)

6.2 (52)

Tunisia

5.3 (107)

6.8 (33)

6.8 (108)

5.9 (107)

7.2 (57)

8.1 (82)

6.6 (65)

6.8 (19)

Turkey

6.9 (45)

5.6 (72)

8.9 (52)

6.4 (83)

5.9 (118)

6.7 (121)

4.8 (123)

6.2 (47)

Uganda

7.1 (34)

4.9 (91)

8.4 (67)

7.0 (49)

7.7 (24)

8.9 (49)

8.1 (22)

6.0 (62)

Ukraine

5.7 (91)

4.7 (94)

5.3 (138)

6.7 (69)

6.0 (113)

8.1 (79)

6.2 (76)

3.8 (138)

United Arab Emir.

7.1 (35)

6.9 (29)

8.4 (65)

7.8 (11)

7.5 (33)

7.8 (95)

7.2 (52)

7.4 (9)

United Kingdom

5.7 (93)

8.2 (12)

9.6 (13)

7.7 (14)

7.4 (37)

7.3 (111)

8.2 (21)

6.7 (26)

United States

6.5 (65)

7.3 (24)

9.6 (11)

7.0 (48)

7.6 (27)

7.0 (116)

9.1 (5)

6.7 (27)

Uruguay

6.5 (64)

5.7 (69)

8.8 (56)

6.9 (52)

6.5 (95)

7.0 (115)

6.6 (67)

6.0 (65)

Venezuela

4.9 (117)

2.6 (138)

5.4 (137)

3.0 (140)

5.6 (128)

9.0 (38)

4.5 (127)

3.2 (140)

Vietnam

6.7 (53)

5.9 (57)

5.9 (131)

7.1 (43)

6.7 (84)

9.6 (13)

5.7 (95)

4.8 (125)

Zambia

8.1 (10)

5.9 (60)

8.5 (63)

7.1 (39)

6.6 (91)

7.9 (92)

6.5 (70)

5.5 (94)

Zimbabwe

4.1 (136)

3.5 (129)

2.5 (141)

5.5 (122)

4.9 (138)

5.6 (135)

5.2 (114)

3.8 (137)

14  Chapter 1: Economic Freedom of the World, 2009

The Chain-Linked Summary Index, 1970–2009 The EFW data are available for many countries back to 1970. Through time, the index has become more comprehensive and the available data more complete. As a result, the number and composition of the components for many countries will vary across time. This presents a problem similar to that confronted when calculating GDP or a price index over time when we know that the underlying goods and services are changing from one year to another. In order to correct for this problem and assure comparability across time, we have done the same thing that statisticians analyzing national income do: we have chain-linked the data. The base year for the chain-linked index is 2000, and as a result the chain-linked index is not available for any countries added since that year. Changes in a country’s chain-linked index through time are based only on changes in components that were present in adjoining years. For example, the 2005 chain-linked rating is based on the 2004 rating but is adjusted based on the changes in the underlying data between 2004 and 2005 for those components that were present in both years. If the common components for a country in 2005 were the same as in 2004, then no adjustment was made to the country’s 2005 summary rating. However, if the 2005 components were lower than those for 2004 for the components present in both years, then the country’s 2005 summary rating was adjusted downward proportionally to reflect this fact.

Correspondingly, in cases where the ratings for the common components were higher in 2005 than for 2004, the country’s 2005 summary rating was adjusted upward proportionally. The chain-linked ratings were constructed by repeating this procedure backward in time to 1970 and forward in time to 2009. The chain-linked methodology means that a country’s rating will change across time periods only when there is a change in ratings for components present during adjacent years. This is precisely what one would want when making comparisons across time periods. Exhibit 1.5 shows the average chain-linked economic freedom index rating for the 102 countries with ratings since 1980. The average level of economic freedom, as measured by the chain-linked EFW index, has increased to 6.64 in 2009 from 5.53 in 1980. During the past two years, however, the average summary rating has declined, slipping from 6.74 in 2007 to 6.64 in 2009. Much of the long-term increase since 1980 was driven by reductions in marginal income-tax rates, improvements in monetary policy, and global trade liberalization. The Chain-Linked Summary ratings for all years are found in exhibit 1.6. Researchers using the data for longterm studies should use these chain-linked data. These longitudinal data make it possible to follow the changes in economic freedom and analyze their impact over a lengthy period of time.

Exhibit 1.5: Average Chain-linked EFW Rating for the 102 countries with ratings since 1980 10

Average Chain-linked EFW rating

9 8 7 6

5.53

5.56

1980

1985

5.87

6.25

6.58

6.69

6.73

6.74

6.67

6.64

2000

2005

2006

2007

2008

2009

5 4 3 2 1 0

1990

1995

Economic Freedom of the World: 2011 Annual Report  15

The chain-linked methodology was also used to derive area ratings. The ratings (and rankings) for the chain-linked summary and area ratings are presented in the country tables. The country tables also present the unadjusted summary and area ratings, but when tracking ratings across time, the chain-linked ratings will present a more accurate picture. Big movers The chain-linked summary ratings of Uganda, Zambia, Nicaragua, Albania, and Peru have improved by three or more points since 1990. The summary ratings of eight other countries—Bulgaria, Poland, El Salvador, Romania, Ghana, Nigeria, Hungary, and Guinea-Bissau—improved

by between two and three points during this same period. The rankings of these countries improved substantially. In contrast, the summary ratings of Venezuela, Zimbabwe, United States, and Malaysia fell by eight tenths of a point or more between 1990 and 2009, causing their rankings to slip. Several economies that were centrally planned for many years have made remarkable progress during the past decade. Eight of them—the Slovak Republic, Estonia, Hungary, Lithuania, Bulgaria, Albania, Mongolia, and Georgia—now rank in the top 40. By way of comparison, only three Latin American countries—Chile, Panama, and Peru – place in the top 40. All of these countries now rank higher than Sweden and France, for example.

Exhibit 1.6: The Chain-Linked Summary Index of Ratings, 1970–2009 1970

1975

1980

1985

Albania Algeria

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

4.24

4.87

6.04

6.10

6.40

6.87

6.60

7.06

7.23

7.38

7.38

7.54

4.30

4.05

3.89

4.53

4.98

4.97

4.89

4.90

5.00

5.83

5.73

5.52

5.34

5.39

Angola Argentina

5.29

3.35

4.41

3.98

4.78

6.77

7.19

6.49

6.16

5.99

6.20

5.94

6.06

6.27

6.01

5.92

Australia

7.24

6.30

7.13

7.35

7.66

7.80

7.88

7.65

7.71

7.84

7.81

7.85

7.91

7.93

7.84

7.91

Austria

6.63

6.28

6.76

6.72

7.22

7.04

7.37

7.21

7.22

7.76

7.74

7.70

7.69

7.67

7.57

7.48

6.67

6.57

6.51

6.54

6.40

6.63

6.69

6.67

6.78

6.88

7.10

6.95

7.07

7.11

7.10

7.46

6.85

6.85

6.93

7.28

7.18

7.16

7.19

7.07

6.92

7.22

7.35

7.27

7.24

Armenia

Azerbaijan Bahamas Bahrain Bangladesh

3.16

3.63

3.94

4.68

5.45

5.82

5.76

5.93

5.77

5.69

5.88

6.00

5.92

5.94

6.11

Barbados

5.69

5.86

6.23

6.14

6.08

6.09

6.08

6.00

6.07

6.16

6.26

6.01

6.21

5.95

6.06

7.05

7.27

7.30

7.54

7.26

7.74

7.41

7.34

7.53

7.43

7.23

7.20

7.29

7.13

7.08

Belize

5.63

5.48

5.98

6.40

6.41

6.33

6.73

6.82

6.80

6.84

6.77

6.73

6.72

6.74

Benin

5.04

4.80

5.06

4.70

5.25

5.28

5.39

5.29

5.23

5.36

5.63

5.55

5.52

5.54

Bolivia

4.39

3.55

5.39

6.40

6.79

6.51

6.44

6.36

6.30

6.40

6.43

6.18

6.15

6.28

5.55

5.80

6.04

6.29

7.10

7.05

7.06

6.85

6.86

6.74

6.71

7.14

6.89

6.64

4.45

3.87

4.54

4.58

5.85

5.83

5.98

5.86

5.82

6.25

6.21

6.15

6.25

6.20

5.51

4.23

4.58

5.27

5.79

6.38

6.60

6.54

6.94

7.08

7.17

7.18

7.21

4.44

4.74

4.88

4.39

4.78

4.96

4.89

4.38

4.28

4.59

4.95

5.11

4.62

4.87

5.74

5.77

5.70

5.58

5.84

6.03

6.04

6.06

6.10

5.94

6.00

5.90

5.86

6.00

7.67

7.75

8.07

7.90

8.15

8.03

8.04

8.13

8.11

8.06

8.03

7.98

7.92

7.78

Belgium

7.81

Bosnia & Herzeg. Botswana Brazil

5.66

4.78

Bulgaria Burkina Faso Burundi

4.31

Cameroon Canada

8.05

7.13

16  Chapter 1: Economic Freedom of the World, 2009

Exhibit 1.6 (continued): The Chain-Linked Summary Index of Ratings, 1970–2009 1970

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Central African Rep.

4.70

5.11

4.68

5.09

5.15

5.01

5.55

5.44

4.96

5.20

5.25

5.16

5.26

Chad

5.05

5.05

5.02

5.47

5.95

6.06

5.95

5.83

5.69

5.77

5.37

5.28

5.63

5.56

6.18

7.02

7.47

7.28

7.47

7.59

7.75

7.67

7.94

7.97

8.08

8.08

7.83

4.23

5.15

4.96

5.30

5.73

5.79

5.79

5.85

5.66

6.08

6.13

6.23

6.20

6.24

Chile

4.31

1975

3.93

China

1980

Colombia

5.32

5.01

4.83

5.19

5.12

5.45

5.31

5.42

5.44

5.63

5.63

5.87

6.05

6.19

6.14

6.27

Congo, Dem. Rep.

4.47

4.02

3.00

3.87

3.39

3.56

4.10

4.05

4.69

4.56

4.68

4.66

5.27

4.95

4.86

4.77

4.63

4.43

5.12

5.24

4.50

4.83

4.68

4.71

4.73

4.66

4.79

4.61

4.77

5.06

5.61

5.36

6.76

6.85

7.31

7.17

7.04

7.30

7.14

7.28

7.45

7.24

7.10

7.08

5.59

6.15

5.60

5.24

6.07

6.14

5.99

5.93

5.92

6.03

6.07

6.03

5.67

5.88

4.91

6.10

6.07

6.21

6.31

6.42

6.40

6.47

6.58

6.54

6.49

6.16

6.17

6.26

6.66

6.61

7.25

7.34

7.29

7.42

7.50

7.48

5.79

6.48

6.55

6.66

6.82

6.85

6.70

6.69

6.92

6.87

6.82

Congo, Rep. of Costa Rica

6.33

Côte d’Ivoire Croatia Cyprus

5.77

5.57

5.51

5.98

Czech Republic Denmark

7.05

6.33

6.53

6.68

7.41

7.46

7.65

7.44

7.57

7.78

7.76

7.72

7.72

7.74

7.70

7.54

5.33

4.98

4.60

5.86

6.54

6.49

6.46

6.08

5.41

6.30

6.15

6.26

6.25

6.58

5.03

5.40

4.63

5.31

5.98

5.69

5.48

5.97

5.92

5.28

5.79

5.85

5.81

6.04

6.02

3.97

4.83

5.36

5.01

5.84

6.60

6.43

6.16

6.07

6.16

6.63

6.77

6.92

6.79

6.55

4.84

4.49

4.77

7.00

7.30

7.28

7.22

7.25

7.32

7.60

7.56

7.60

7.58

7.29

5.70

7.36

7.42

7.50

7.58

7.57

7.84

7.81

7.77

7.55

7.45

Dominican Rep. Ecuador

4.07

Egypt El Salvador Estonia Ethiopia Fiji

5.34

5.70

6.03

5.90

6.09

6.23

6.09

6.02

5.99

6.06

6.48

6.62

6.56

6.57

6.56

Finland

7.13

6.39

6.95

7.15

7.40

7.32

7.51

7.39

7.43

7.70

7.62

7.72

7.66

7.67

7.56

7.58

France

6.86

6.01

6.22

6.13

7.07

6.80

7.06

6.73

6.87

7.11

7.16

6.97

7.01

7.18

7.20

7.05

4.55

5.09

5.33

5.26

5.75

5.57

5.51

5.50

5.52

5.49

5.68

5.60

5.64

5.66

7.11

7.37

7.40

7.80

7.52

7.52

7.31

7.39

7.71

7.65

7.64

7.60

7.54

7.47

7.45

4.10

3.27

3.41

5.04

5.43

5.86

5.98

6.21

6.68

6.43

6.73

7.33

7.25

7.26

7.15

Gabon Georgia Germany

7.69

Ghana Greece

6.35

5.99

5.97

5.38

6.04

6.18

6.66

6.57

6.66

7.00

6.87

7.00

6.91

6.96

6.82

6.53

Guatemala

6.17

6.63

6.03

4.90

5.56

6.67

6.38

6.43

6.49

6.61

6.68

7.09

7.16

7.28

7.14

7.10

3.15

3.71

4.51

4.96

5.05

4.89

4.84

4.78

5.22

4.91

4.89

5.16

5.27

6.66

6.56

6.35

6.30

6.09

6.66

6.51

6.71

6.74

6.59

Guinea-Bissau Guyana Haiti

6.29

5.66

5.36

5.29

6.54

6.36

6.33

6.49

6.51

6.61

6.62

6.50

6.66

6.84

Honduras

6.06

5.46

5.52

6.07

6.51

6.38

6.65

6.68

6.73

6.85

7.17

7.34

7.14

6.92

9.21

8.81

8.76

9.11

8.82

8.76

8.76

8.81

8.75

8.94

8.95

9.00

9.04

8.98

4.63

5.24

5.39

6.14

6.55

6.82

6.82

7.39

7.50

7.39

7.34

7.32

7.38

7.47

Hong Kong

8.99

8.85

Hungary Iceland

6.45

4.78

5.43

5.75

7.03

7.40

7.76

7.67

7.60

7.72

7.73

7.71

7.61

7.46

6.89

6.72

India

5.43

4.56

5.41

5.08

5.13

5.76

6.27

6.11

6.32

6.42

6.43

6.55

6.49

6.45

6.45

6.38

Indonesia

4.74

5.39

5.24

6.16

6.53

6.57

6.04

5.72

5.98

6.26

6.19

6.41

6.38

6.55

6.56

6.53

Iran

5.64

5.48

3.75

4.07

4.77

4.50

5.76

6.17

6.10

6.04

6.18

6.30

6.28

6.15

6.15

6.22

Ireland

7.12

6.20

6.73

6.75

7.32

8.20

8.16

7.96

7.99

7.93

8.02

8.07

7.94

7.87

7.71

7.32

Economic Freedom of the World: 2011 Annual Report  17

Exhibit 1.6 (continued): The Chain-Linked Summary Index of Ratings, 1970–2009 1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Israel

5.11

4.44

3.79

4.34

4.79

5.87

6.55

6.49

6.95

6.90

6.92

7.03

6.88

6.61

6.55

6.43

Italy

6.08

5.33

5.53

5.68

6.59

6.50

7.11

6.96

7.03

6.81

6.91

7.01

6.92

6.84

6.75

6.67

4.22

5.03

5.59

6.43

7.23

7.06

7.09

7.08

7.23

7.26

7.23

7.08

6.89

6.86

6.57

7.08

7.12

7.47

7.11

7.45

7.08

7.16

7.53

7.43

7.47

7.48

7.58

7.46

7.37

5.46

5.50

5.84

6.05

6.42

7.24

6.97

7.14

7.11

7.03

7.38

7.29

7.41

7.14

6.84

Jamaica Japan

7.04

Jordan Kazakhstan Kenya

5.11

4.84

5.04

5.41

5.58

5.88

6.68

6.76

6.72

6.92

6.74

7.28

7.20

7.37

6.99

7.17

Korea

5.49

5.37

5.71

5.65

6.19

6.42

6.58

6.90

7.00

7.09

7.18

7.36

7.52

7.56

7.39

7.37

5.01

6.88

5.47

6.69

6.72

7.06

7.10

7.22

7.21

7.25

7.47

7.46

7.55

7.13

5.19

6.62

6.66

6.97

6.83

6.89

7.18

7.21

7.03

6.88

6.73

5.10

6.28

6.32

6.77

6.74

6.68

7.11

7.09

7.15

7.08

7.02

Kuwait Kyrgyz Republic Latvia Lesotho Lithuania Luxembourg

7.59

7.64

7.58

7.94

7.88

7.70

7.87

7.85

7.71

7.73

7.76

7.47

7.49

7.51

7.52

7.42

4.55

4.79

4.68

4.67

5.94

6.27

5.82

6.07

5.90

5.94

6.00

6.29

6.28

6.40

5.38

4.94

5.16

5.48

4.69

5.01

5.52

5.58

6.00

5.68

5.46

5.33

5.79

5.95

6.00

6.42

7.07

7.12

7.49

7.55

6.72

6.35

6.55

6.64

6.80

6.89

6.92

6.96

6.71

6.68

5.68

5.78

4.93

5.16

5.26

6.23

6.07

5.73

6.12

5.93

6.03

6.28

6.35

5.98

6.03

5.57

5.23

5.42

6.56

6.45

6.42

6.49

6.18

6.94

7.10

7.09

7.25

7.02

6.98

5.21

5.16

6.25

6.23

7.29

7.39

7.16

7.01

6.89

6.83

7.17

7.16

7.53

7.61

7.47

6.53

5.80

5.69

4.91

6.28

6.46

6.39

6.24

6.52

6.48

6.61

7.00

6.97

6.92

6.87

6.75

5.76

5.16

4.54

5.25

5.27

6.15

6.12

6.10

6.11

6.28

6.09

6.31

6.29

6.29

6.29

6.25

4.84

4.42

3.46

4.02

4.00

3.77

3.41

3.21

3.54

3.67

3.87

3.36

3.49

3.59

5.33

6.28

6.47

6.49

6.49

6.59

6.32

6.56

6.51

6.75

6.63

6.63

Macedonia Madagascar Malawi Malaysia

6.63

Mali Malta Mauritania Mauritius Mexico Moldova Mongolia Montenegro Morocco Mozambique Myanmar Namibia Nepal

5.75

5.31

5.42

5.37

5.75

5.78

5.70

5.21

5.27

5.38

5.42

5.58

5.44

5.40

Netherlands

7.64

6.96

7.51

7.65

7.82

7.80

8.05

7.76

7.78

7.70

7.69

7.59

7.50

7.52

7.45

7.25

New Zealand

6.72

6.02

6.73

6.57

7.95

8.64

8.35

8.22

8.37

8.38

8.38

8.37

8.16

8.30

8.22

8.15

Nicaragua

4.17

2.11

2.96

5.38

6.50

6.30

6.57

6.67

6.57

6.82

6.92

7.09

6.83

6.76

Niger

4.69

5.06

5.06

4.43

5.42

5.05

5.02

5.09

5.47

5.40

5.49

5.42

5.35

5.47

Nigeria

3.82

3.76

3.76

4.04

3.73

4.20

5.52

5.31

5.77

5.82

5.84

6.01

6.21

6.21

5.96

5.84

Norway

6.38

5.90

6.17

6.70

7.26

7.34

7.04

6.84

6.78

7.35

7.32

7.47

7.42

7.45

7.36

7.24

6.70

6.23

6.73

7.03

7.11

7.07

7.30

7.26

7.33

7.37

7.50

7.40

7.64

5.09

5.13

5.73

5.55

5.61

5.70

5.49

5.49

5.90

5.92

5.94

5.83

6.00

Oman Pakistan

4.57

3.83

4.65

18  Chapter 1: Economic Freedom of the World, 2009

Exhibit 1.6 (continued): The Chain-Linked Summary Index of Ratings, 1970–2009 1970 Panama

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

6.68

5.66

6.22

6.53

7.36

7.41

7.38

7.36

7.40

7.38

7.47

7.53

7.52

7.32

7.30

6.16

6.31

6.53

5.96

5.99

5.91

5.89

5.93

6.51

6.51

6.92

6.94

6.98

5.76

5.12

5.78

6.50

6.28

6.35

6.23

6.22

6.15

6.46

6.53

6.49

6.62

6.65

Papua New Guinea Paraguay Peru

4.75

4.03

4.27

3.11

4.13

6.31

7.07

7.05

7.06

7.07

7.09

7.19

7.18

7.24

7.36

7.29

Philippines

5.73

5.42

5.42

5.11

5.85

7.24

6.98

6.81

6.91

6.95

6.72

7.09

7.00

6.91

6.77

6.45

4.07

4.00

5.30

6.19

5.97

6.30

6.26

6.71

6.78

6.80

6.85

6.88

6.90

5.74

6.54

7.32

7.37

7.25

7.41

7.38

7.48

7.11

7.16

7.16

7.07

6.90

4.64

4.54

3.90

5.19

5.25

5.75

6.04

6.01

6.82

6.73

6.95

6.72

6.93

4.49

5.27

5.15

5.57

5.64

5.93

6.37

6.36

6.50

6.57

6.50

5.08

3.89

5.45

5.65

5.96

5.49

5.48

5.70

6.00

6.22

6.61

6.43

Poland Portugal

6.37

4.28

5.99

Romania Russia Rwanda Senegal

4.65

5.31

5.41

4.83

5.90

5.72

5.81

5.70

5.73

5.70

5.61

5.67

5.56

5.67

5.43

5.51

3.89

4.04

4.47

5.31

5.12

5.42

5.68

5.49

5.35

5.43

5.79

5.42

5.44

7.58

7.93

8.13

8.73

8.81

8.53

8.44

8.66

8.57

8.57

8.82

8.75

8.79

8.75

8.73

Slovak Rep

5.54

6.16

6.49

6.47

6.81

7.36

7.67

7.56

7.56

7.55

7.53

Slovenia

4.76

6.36

6.49

6.47

6.56

6.55

6.41

6.49

6.47

6.52

6.46

Serbia Sierra Leone Singapore

7.89

South Africa

6.69

5.97

6.12

5.78

5.62

6.44

6.96

6.92

6.98

7.10

6.93

6.77

6.75

6.79

6.53

6.39

Spain

6.71

6.02

6.19

6.18

6.51

7.04

7.31

7.06

7.10

7.50

7.50

7.35

7.28

7.27

7.19

6.92

5.10

5.17

5.02

6.02

6.10

6.02

5.95

6.11

5.93

5.97

6.04

6.02

5.90

5.98

Sri Lanka Sweden

5.77

5.64

5.95

6.66

7.08

7.14

7.44

7.16

7.39

7.52

7.29

7.35

7.31

7.29

7.26

7.22

Switzerland

7.95

7.78

8.18

8.28

8.22

7.96

8.39

8.14

8.28

8.26

8.21

8.07

8.07

8.11

7.91

7.93

Syria

4.27

4.47

3.67

3.36

3.87

4.53

4.91

5.22

4.96

4.82

5.21

5.46

5.20

5.48

5.08

5.31

Taiwan

6.88

6.10

6.92

7.10

7.39

7.33

7.31

7.19

7.38

7.39

7.60

7.69

7.74

7.68

7.54

7.42

Tanzania

4.79

3.72

4.06

3.73

4.24

5.53

5.95

6.05

5.89

5.91

6.02

6.02

6.10

5.99

5.89

6.02

Thailand

6.06

6.05

6.19

6.21

6.97

7.19

6.52

6.20

6.67

6.66

6.68

6.92

7.02

7.04

7.04

6.96

4.22

5.16

5.65

5.38

5.84

6.07

6.22

5.84

5.67

5.87

6.00

5.70

5.65

5.63

4.80

5.07

4.92

5.64

6.93

7.18

7.11

6.89

6.77

6.78

6.75

6.85

6.81

6.83

6.68

Togo Trinidad & Tobago Tunisia

4.80

4.78

5.09

4.80

5.48

5.75

6.03

6.05

5.95

5.93

5.97

6.05

6.03

6.01

5.98

5.96

Turkey

4.06

4.19

3.95

5.08

5.14

5.72

5.75

5.25

5.51

6.00

6.12

6.36

6.47

6.53

6.91

6.84

3.42

3.01

3.00

5.17

6.57

6.51

6.52

6.62

6.61

6.85

7.01

7.15

7.12

7.10

3.72

4.70

4.80

5.39

5.29

5.55

5.60

5.68

5.76

5.60

5.69

Uganda Ukraine United Arab Emir.

5.92

6.79

7.18

6.77

7.02

6.99

7.07

7.11

6.96

7.22

7.35

7.27

7.38

7.26

United Kingdom

6.56

6.29

6.73

7.66

8.14

8.04

8.25

8.11

8.15

8.25

8.10

8.04

7.96

7.84

7.78

7.68

United States

7.74

7.83

8.03

8.18

8.43

8.32

8.45

8.23

8.22

8.17

8.15

8.07

8.01

8.08

7.89

7.58

5.95

5.86

6.17

6.11

6.68

6.50

6.75

6.63

6.74

6.74

6.67

6.69

6.67

6.64

5.80

6.29

5.95

5.45

4.34

5.61

5.50

4.51

4.07

4.53

4.74

4.82

4.37

4.30

4.23

4.60

5.08

3.97

3.52

4.87

6.63

6.58

6.56

6.72

6.76

6.99

7.31

7.36

7.30

7.35

4.93

4.85

5.05

5.81

4.59

3.62

3.59

3.77

3.32

3.37

3.39

2.96

4.03

4.06

Uruguay Venezuela

6.81

Vietnam Zambia Zimbabwe

Economic Freedom of the World: 2011 Annual Report  19

Exhibit 1.7 shows the five countries whose ratings on the Chain-Linked Summary Index have improved the most since 2000. Cyprus and Ghana achieved the greatest improvement: Cyprus jumped from a rating of 6.17 in 2000 to 7.48 in 2009, pushing its ranking to 18th; Ghana’s rating improved from 5.86 in 2000 to 7.15 in 2009, pushing its ranking up from 90th to 70th. The ratings of Colombia, Malawi, and Turkey improved by approximately one point between 2000 and 2009. Clearly, the countries with the greatest improvements were a diverse group. Exhibit 1.8 shows the five countries, among the 123 for which the data were available, whose ratings on the Chain-Linked Summary Index declined the most since

2000: Argentina, Iceland, Ireland, United States, and Venezuela. Argentina’s rating fell from 7.19 in 2000 to 5.92 in 2009, causing its ranking to plummet from 32nd to 102nd. Venezuela’s rating declined from 5.61 in 2000 to 4.23 in 2009, pushing its ranking down from 101st to 121st. The ratings of Iceland and Ireland fell sharply beginning in 2005 as they both ran into financial difficulties. The chain-linked rating of the United States fell from 8.45 in 2000 to 7.58 in 2009, causing the accompanying ranking to slip from 3rd to 10th. Lower ratings in the legal structure area and government borrowing that dominated the credit market (5Aiii) were primarily responsible for the decline in the overall rating of the United States.

Exhibit 1.7: Countries showing the greatest improvement on the chain-linked EFW index, 2000–2009 8.0

Chain-linked EFW rating

7.5

Cyprus Ghana

7.0

Turkey

6.5 Colombia Malawi

6.0 5.5 5.0 4.5

2000

2005

2009

Exhibit 1.8: Countries showing the greatest decline on the chain-linked EFW index, 2000–2009 9.0 8.5 Chain-linked EFW rating

8.0 United States Ireland

7.5 7.0

Iceland

6.5 6.0

Argentina

5.5 5.0 4.5 4.0

Venezuela

2000

2005

2009

20  Chapter 1: Economic Freedom of the World, 2009

Economic Freedom and other indicators of human and political progress This graphs shown in exhibits 1.9 to 1.17 illustrate simple relationships between economic freedom and some other indicators of human and political progress. They use the average of the chain-linked EFW index for the period from 1990 to 2009, breaking the data into four quartiles ordered from least free to most free. Because persistence is important and the impact of economic freedom will be felt over a lengthy time period, it is better to use the average rating over a fairly long time span rather than the current rating to observe the impact of economic freedom on performance. The graphs begin with the data on the relationship between economic freedom and the level of per-capita GDP and economic growth.1 In recent years, numerous scholarly 1 The bar chart in exhibit 1.10, Economic Freedom and Economic Growth, is based on a regression in which we controlled for the initial level of development. The regression was: (Growth, 1990–2009) = 3.06 (Most Free Quartile) + 2.43 (Second Quartile) + 2.27 (Third Quartile) + 1.18 (Least Free Quartile) − 0.046 (GDP per capita, 1990).

studies have analyzed these relationships in detail. Almost without exception, these studies have found that countries with higher and improving economic freedom grow more rapidly and achieve higher levels of per-capita GDP. Many of the relationships illustrated in the graphs below reflect the impact of economic freedom as it works through increasing economic growth. In other cases, the observed relationships may reflect the fact that some of the variables that influence economic freedom may also influence political factors like trust, honesty in government, and protection of civil liberties. Thus, we are not necessarily arguing that there is a direct causal relation between economic freedom and the variables considered below. In other words, these graphics are no substitute for real, scholarly investigation that controls for other factors. Nonetheless, we believe that the graphs provide some insights about the contrast between the nature and characteristics of market-oriented economies and those dominated by government regulation and planning. At the very least, these figures suggest potential fruitful areas for future research.

Exhibit 1.9: Economic Freedom and Income per Capita 35,000 $31,501

Countries with more economic freedom have substantially higher per-capita incomes.

GDP per capita, 2009

30,000 25,000 20,000 $14,961

15,000 10,000 5,000 0

$4,545

Least Free

$6,464

Third Second Economic Freedom Quartile

Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Bank, World Development Indicators.

Economic Freedom of the World: 2011 Annual Report  21

Exhibit 1.10: Economic Freedom and Economic Growth

Growth (%) in GDP per capita, 2009

3.5 3.1%

3.0 2.5

2.3%

2.4%

The economies of countries with more economic freedom tend to grow more rapidly.

2.0 1.5

1.2%

Note: The data for growth were adjusted to

1.0

control for the initial level of income.

0.5 0.0

Least Free

Third Second Economic Freedom Quartile

Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Bank, World Development Indicators.

Exhibit 1.11: Economic Freedom and the Income Share of the Poorest 10%, 1990–2009 3.0 2.6%

Income share (%)

2.5

2.4% 2.2%

2.3%

2.0 1.5 1.0 0.5 0.0

Least Free

Third Second Economic Freedom Quartile

Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Bank, World Development Indicators.

The share of income earned by the poorest 10% of the population is unrelated to economic freedom.

22  Chapter 1: Economic Freedom of the World, 2009

Exhibit 1.12: Economic Freedom and Income per Capita among the Poorest 10%, 2009 10,000

Income (2009, estimated)

$8,735 8,000

6,000

4,000

2,000

0

The amount, as opposed to the share, of income earned by the poorest 10% of the population is much higher in countries with greater economic freedom.

$3,311

$1,061

Least Free

$1,617

Third Second Economic Freedom Quartile

Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Bank, World Development Indicators.

Exhibit 1.13: Economic Freedom and Life Expectancy, 2009 Life expectancy at birth, total (years, 2009)

90 79.4

80 67.9

70 60

72.5

60.7

50 40 30 20 10 0

Least Free

Third Second Economic Freedom Quartile

Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Bank, World Development Indicators.

Life expectancy is about 20 years longer in countries with the greatest economic freedom than it is in countries with the least.

Economic Freedom of the World: 2011 Annual Report  23

Exhibit 1.14: Economic Freedom and Literacy, 2000–2009 100 88.3%

Literacy rate (%, 2000–2009)

90

70

92.2%

94.6%

Literacy increases as economic freedom increases, especially for women.

81.3%

76.8%

80

91.6%

70.1% 64.0%

60 50 40 30 20 10 0

Least Free

Women

Third Second Economic Freedom Quartile

Most Free

Men

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Bank, World Development Indicators.

Exhibit 1.15: Economic Freedom and Educational Quality, 2009 7

Perceived educational quality increases with economic freedom.

Educational Quality

6 4.8

5 4 3.4

3.4

3.7

Based on the question: “How well does the educational system in your country meet the

3

needs of a competitive economy? 1 = Not well at all; 7 = Very well” (Executive Opinion Survey).

2 1

Least Free

Third Second Economic Freedom Quartile

Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Economic Forum, Executive Opinion Survey.

24  Chapter 1: Economic Freedom of the World, 2009

Exhibit 1.16: Economic Freedom and Quality of Healthcare, 2009 7

Quality of Healthcare

6

5.5

Perceived quality of healthcare increases with economic freedom.

5 3.9

4

Based on the question: “How would you assess

3.3 3

the quality of healthcare provided for ordinary

2.8

citizens in your country? 1 = Very poor, 7 = Excellent, among the best” (Executive Opinion

2

Survey). 1

Least Free

Third Second Economic Freedom Quartile

Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Economic Forum, Executive Opinion Survey.

Poverty Rate at $1.25 per day (%, 2000–2005)

Exhibit 1.17: Economic Freedom and Poverty, 2000–2005 100 90

The rate of extreme poverty decreases as economic freedom increases.

80 70 60 50 40

41.5

30

21.3

20

7.7

10 0

Least Free

Third Second Economic Freedom Quartile

2.7 Most Free

Sources: Fraser Institute, Economic Freedom of the World: 2011 Annual Report; World Bank, World Development Indicators and calculations by Joe Connors (Duke University).

Economic Freedom of the World: 2011 Annual Report  25

Chapter 2 Country Data Tables This chapter presents detailed data on the compo­nents used in constructing the EFW index for the 141 countries included in this study. For each country for which data were available, we present the overall EFW index rating and the rank of that country for the years 1980, 1985, 1990, 1995, 2000, 2005, 2008, and 2009. (Ratings are also available for many countries for 1970, 1975, 2001, 2002, 2003, 2004, 2006, and 2007, but these data are not shown in the tables due to limited space.) Like all the ratings in the index, these are values out of 10; 10 is the highest possible rating and zero (0) is the lowest. A higher rating indicates a greater degree of economic freedom. Chain-Linked  The country data tables show both unadjusted and chain-linked ratings and ranks. See chapter 1 for a

full explanation of the chain-linked method. The top row under the “Chain-linked” section shows the country’s chainlinked summary rating for each year and, in parentheses, its overall rank. In the rows below, titles on the left in bold face indicate the five areas of economic freedom that are combined to generate an overall rating. The cells to their right give the chain-linked rating and, in parentheses, the rank for that par­ticular area for each year.

Unadjusted  The top row under the “Unadjusted” section shows the country’s summary rating for each year and, in parentheses, its overall rank. In the rows below, titles on the left in bold face indicate the five areas of economic freedom that are combined to generate an overall score. The cells to their right give the rating for that area for each year. Underneath each area title are the titles of the components and sub-components that are combined to generate that area’s score. In these rows are the scores for each year presented, where data are available. Shown in italic beside some scores are the actual data used to derive that particular component rating. For some countries, data for other components for certain years may be reported even though there were insufficient data to compute area or summary ratings. A more complete description of each compo­nent, including the methodology used to calculate the ratings, can be found in the Appen­dix: Explanatory Notes and Data Sources (p. 191).

Data available to researchers The full data set, including all of the data published in this report as well as data omitted due to limited space, can be downloaded for free at <http://www.freetheworld.com>. The data file available there contains the most up-to-date and accurate data for the Economic Freedom of the World index. Some variable names and data sources have evolved over the years since the first publication in 1996; users should consult earlier editions of the Economic Freedom of the World annual reports for details regarding sources and descriptions for those years. All editions of the report are available in PDF and can be downloaded for free from <http://www.freetheworld.com/datasets_efw.html>. However, users are always strongly encouraged to use the data from this most recent data file as updates and corrections, even to earlier years’ data, do occur. Users doing long-term or longitudinal studies are encouraged to use the chain-linked index as it is the most consistent through time. If you have problems downloading the data, please contact Jean-François Minardi via e-mail to <freetheworld@fraserinstitute.org> or via telephone +1.514.281.9550 ext. 306. If you have technical questions about the data itself, please contact Robert Lawson via e-mail to <rlawson@smu.edu>. Published work using
research ratings from Economic Freedom of the World A selected list of published papers that have used the economic freedom ratings from Economic Freedom of the World is available on line at <http://www.freetheworld.com/>. In most cases, a brief abstract of the article is provided. If you know of any other papers current or forthcoming that should be included on this page, or have further information about any of these papers or authors, please write to <freetheworld@fraserinstitute.org>.

26  Chapter 2: Country Data Tables

Albania 1980

Chain-Linked

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

4.24 (99)

4.87 (99)

6.04 (83)

7.06 (47)

7.38 (27)

7.54 (12)

3.51 (102)

6.54 (40)

7.63 (18)

8.89 (4)

9.10 (2)

9.06 (3)

Summary Rating (Rank)  Area 1. Size of Government Area 2. Legal Structure and Security of Property Rights

5.25 (54)

5.21 (57)

4.64 (97)

4.58 (85)

5.46 (70)

6.02 (56)

6.19 (50)

Area 3. Access to Sound Money

4.89 (94)

4.90 (91)

3.26 (105)

7.40 (71)

9.64 (9)

9.40 (25)

9.63 (6)

5.38 (97)

5.32 (112)

5.41 (106)

6.16 (85)

6.50 (70)

4.55 (99)

5.27 (98)

6.03 (87)

6.39 (70)

6.44 (69)

Area 4. Freedom to Trade Internationally Area 5. Regulation of Credit, Labor, and Business

Unadjusted

2.58 (117)

4.60 (98)

Summary Rating (Rank)  Rating Data

Rating Data

1. Size of Government A. Government consumption

7.70 (13.81)

7.83 (13.39)

B. Transfers and subsidies

Rating Data

4.83 (101) Rating Data

6.04 (83)

6.86 (69)

7.18 (46)

7.32 (30)

Rating Data

Rating Data

Rating Data

Rating Data

4.19

6.54

7.63

8.00

8.24

8.20

4.87 (23.44)

7.78 (13.55)

9.10 (9.07)

9.00 (9.40)

8.86 (9.87)

8.70 (10.43)

3.51 (24.30)

7.85 (8.40)

7.80 (8.57)

9.70 (1.70)

9.59 (2.01)

9.59 (2.01)

4.00 (39.00)

6.00 (26.70)

8.00 (19.50)

6.00 (26.38)

6.00 (28.93)

5.50

8.50

C. Government enterprises and investment D. Top marginal tax rate (i) Top marginal income tax rate

9.00 (25)

(ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

5.25

5.21

4.64

4.58

3.94

4.31

A. Judicial independence B. Impartial courts C. Protection of property rights

10.00 (10)

8.50 10.00 (10)

2.00 (51)

7.00 (35)

7.00 (35)

4.80

5.30

5.45

2.40

3.23

3.77

2.70

4.39

4.70

3.40

3.72

3.91

D. Military interference in rule of law and politics

3.65

6.67

8.30

8.33

8.33

E. Integrity of the legal system

6.96

3.33

3.70

4.17

4.17

F. Legal enforcement of contracts

5.20

5.17

5.17

G. Regulatory restrictions on sale of real property

8.10

8.09

8.09

7.40

9.60

9.40

9.63

3. Access to Sound Money

6.52

6.54

3.26 0.00 (78.90)

9.57 (2.16)

9.50 (2.50)

8.88 (5.60)

9.24 (3.80)

B. Standard deviation of inflation

9.64 (0.91)

9.62 (0.95)

0.00 (86.94)

5.03 (12.43)

9.50 (1.16)

9.37 (1.57)

9.75 (0.63)

C. Inflation: most recent year

9.93 (0.35)

10.00 (0.00)

8.03 (9.83)

9.99 (0.05)

9.50 (2.37)

9.33 (3.36)

5.00

5.00

10.00

10.00

10.00

5.18

5.32

5.50

6.29

6.63

5.70

6.11

8.20

8.44

8.45

5.70 (6.45)

5.14 (7.29)

8.10 (2.80)

8.57 (2.14)

8.57 (2.14)

(ii) Mean tariff rate

6.60 (17.00)

8.70 (6.30)

8.96 (5.20)

9.00 (5.00)

(iii) Standard deviation of tariff rates

6.60 (8.50)

7.80 (5.40)

7.78 (5.56)

7.78 (5.55)

4.90

6.86

6.90

(i) Non-tariff trade barriers

4.40

6.27

6.35

(ii) Compliance cost of importing and exporting

5.40

7.45

7.45

A. Money growth

D. Freedom to own foreign currency bank accounts

0.00

0.00

0.00

4. Freedom to Trade Internationally A. Taxes on international trade (i) Revenues from trade taxes (% of trade sector)

B. Regulatory trade barriers

9.54 (2.28)

C. Size of trade sector relative to expected

0.51

0.00

0.00

0.00

0.74

1.20

2.97

2.36

D. Black-market exchange rates

0.00

0.00

0.00

10.00

10.00

10.00

10.00

10.00

E. International capital market controls

0.00

0.00

0.00

2.00

1.54

3.30

3.16

5.44

5.00

5.50

6.26

(i) Foreign ownership / investment restrictions (ii) Capital controls

0.00

0.00

0.00

2.00

1.54

1.50

0.83

4.62

2.47

4.55

5.27

6.30

6.67

6.72

A. Credit market regulations

0.00

4.55

4.61

7.90

8.12

8.12

(i) Ownership of banks

0.00

2.00

2.00

5.00

5.00

5.00

9.00

9.00

9.00

5. Regulation of Credit, Labor, and Business

(ii) Foreign bank competition (iii) Private sector credit (iv) Interest rate controls / negative real interest rates

0.00

5.64

2.83

8.50

8.46

8.46

6.00

9.00

9.00

10.00

10.00

6.00

5.79

5.94

(i) Hiring regulations and minimum wage

5.60

5.60

5.57

(ii) Hiring and firing regulations

6.70

6.15

6.05

(iii) Centralized collective bargaining

7.70

7.20

7.02

(iv) Hours regulations

8.00

8.00

8.00

(v) Mandated cost of worker dismissal

4.80

4.81

6.03

3.00

3.00

3.00

5.00

6.10

6.10

6.00

6.00

6.00

(ii) Administrative requirements

2.70

3.97

5.01

(iii) Bureaucracy costs

1.00

6.66

6.30

(iv) Starting a business

8.40

9.66

9.66

(v) Extra payments / bribes / favoritism

4.90

4.29

4.91

(vi) Licensing restrictions

4.60

4.82

4.83

(vii) Cost of tax compliance

7.30

7.26

5.96

B. Labor market regulations

(vi) Conscription

0.00

0.00

0.00

3.00

10.00

C. Business regulations (i) Price controls

0.00

4.00

4.00

Economic Freedom of the World: 2011 Annual Report  27

Algeria Chain-Linked

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

4.30 (87)

4.05 (95)

3.89 (105)

4.53 (109)

4.98 (115)

5.83 (103)

5.34 (113)

5.39 (114)

Area 1. Size of Government

4.72 (64)

3.55 (95)

5.02 (73)

6.71 (36)

5.65 (80)

4.84 (106)

3.49 (122)

3.56 (119)

Area 2. Legal Structure and Security of Property Rights

3.77 (60)

3.52 (82)

3.50 (83)

3.68 (112)

2.87 (120)

5.45 (71)

4.67 (88)

4.80 (86)

Area 3. Access to Sound Money

5.23 (89)

6.30 (74)

4.50 (97)

5.37 (84)

7.00 (80)

7.51 (79)

7.61 (80)

7.01 (93)

Area 4. Freedom to Trade Internationally

4.29 (70)

3.58 (78)

3.38 (100)

3.95 (108)

5.72 (104)

6.32 (82)

5.94 (95)

6.40 (72)

2.96 (110)

2.92 (122)

3.66 (122)

5.12 (113)

5.03 (115)

5.21 (114)

Summary Rating (Rank) 

Area 5. Regulation of Credit, Labor, and Business

Unadjusted

Summary Rating (Rank) 

1. Size of Government A. Government consumption

4.49 (83)

4.24 (92)

Rating Data

Rating Data

3.87 (106)

4.53 (109)

4.98 (115)

5.81 (116)

5.32 (130)

5.36 (131)

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

4.32

3.25

4.60

6.71

5.65

4.80

3.49

3.56

4.65 (24.19)

4.50 (24.69)

5.19 (22.35)

5.29 (22.01)

4.53 (24.60)

3.90 (26.70)

2.44 (31.72)

2.48 (31.56)

7.84 (8.43)

8.41 (6.32)

8.60 (5.50)

8.04 (7.68)

8.18 (7.16)

B. Transfers and subsidies C. Government enterprises and investment

4.00 (32.50)

2.00 (47.90)

4.00 (30.40)

7.00 (24.90)

4.00 (37.80)

2.00 (48.40)

0.00 (61.26)

0.00 (61.26)

3.77

3.52

3.50

3.68

2.87

5.20

4.46

4.58

4.60

3.02

3.00

5.10

3.52

3.62

5.80

3.54

4.29

D. Top marginal tax rate (i) Top marginal income tax rate (ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights A. Judicial independence B. Impartial courts

3.61

3.84

C. Protection of property rights D. Military interference in rule of law and politics

0.00

0.00

5.00

5.00

5.00

E. Integrity of the legal system

6.96

3.33

5.00

5.00

5.00

F. Legal enforcement of contracts

4.40

4.39

4.39

G. Regulatory restrictions on sale of real property

6.60

6.78

6.78

3. Access to Sound Money

5.23

6.30

4.50

5.37

7.00

7.50

7.61

7.01

A. Money growth

8.35 (8.24)

7.81 (10.96)

9.35 (3.25)

8.11 (9.44)

7.95 (10.26)

7.80 (10.80)

7.57 (12.17)

8.01 (9.95)

B. Standard deviation of inflation

7.70 (5.75)

8.33 (4.17)

5.53 (11.17)

4.07 (14.83)

5.14 (12.16)

7.50 (6.20)

8.78 (3.05)

6.19 (9.52)

C. Inflation: most recent year

4.87 (25.66)

9.07 (4.64)

3.12 (34.40)

4.31 (28.46)

9.93 (0.34)

9.70 (1.64)

9.11 (4.44)

8.85 (5.74)

D. Freedom to own foreign currency bank accounts

0.00

0.00

0.00

5.00

5.00

5.00

5.00

5.00

4.66

3.88

3.67

3.95

5.72

6.20

5.82

6.27

7.66

5.66

5.08

3.72

4.95

7.00

6.87

6.90

3.58 (9.63)

6.36 (5.46)

8.20 (2.70)

8.49 (2.26)

8.58 (2.13)

5.42 (22.90)

5.08 (24.60)

6.80 (15.80)

6.28 (18.60)

6.28 (18.60)

2.16 (19.60)

3.40 (16.50)

5.80 (10.50)

5.83 (10.42)

5.83 (10.42)

6.30

6.63

6.76

(i) Non-tariff trade barriers

5.20

5.95

6.21

(ii) Compliance cost of importing and exporting

7.50

7.30

7.30

4. Freedom to Trade Internationally A. Taxes on international trade (i) Revenues from trade taxes (% of trade sector) (ii) Mean tariff rate

7.66 (11.70)

5.66 (21.70)

5.08 (24.60)

(iii) Standard deviation of tariff rates B. Regulatory trade barriers

C. Size of trade sector relative to expected

7.39

5.50

5.02

5.77

5.99

6.20

5.96

6.42

D. Black-market exchange rates

0.00

0.00

0.00

0.00

7.78

7.90

8.16

9.18

E. International capital market controls

0.00

0.00

0.00

2.00

1.67

3.50

1.47

2.09

6.10

2.94

3.41

(i) Foreign ownership / investment restrictions (ii) Capital controls

0.00

0.00

5. Regulation of Credit, Labor, and Business

0.00

2.00

1.67

0.90

0.00

0.77

3.07

2.92

3.66

5.30

5.20

5.37

A. Credit market regulations

0.00

0.00

0.87

0.48

2.26

5.30

5.32

5.54

(i) Ownership of banks

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

8.00

8.00

8.00

(ii) Foreign bank competition (iii) Private sector credit

1.74

(iv) Interest rate controls / negative real interest rates

1.44

1.78

3.30

4.28

4.17

0.00

5.00

10.00

9.00

10.00

5.20

4.93

5.32

(i) Hiring regulations and minimum wage

5.60

5.60

5.57

(ii) Hiring and firing regulations

4.40

3.66

4.70

(iii) Centralized collective bargaining

5.60

4.91

5.85

(iv) Hours regulations

6.00

6.00

6.00

(v) Mandated cost of worker dismissal

8.40

8.42

8.79

1.00

1.00

1.00

5.40

5.35

5.26

4.00

4.00

4.00

(ii) Administrative requirements

3.30

2.34

2.12

(iii) Bureaucracy costs

3.70

6.45

5.91

(iv) Starting a business

8.90

9.00

8.98

(v) Extra payments / bribes / favoritism

5.70

3.75

3.92

(vi) Licensing restrictions

6.90

6.93

6.93

(vii) Cost of tax compliance

4.90

4.94

4.94

B. Labor market regulations

(vi) Conscription

5.00

0.00

1.00

1.00

1.00

C. Business regulations (i) Price controls

2.00

2.00

4.00

28  Chapter 2: Country Data Tables

Angola 1980

Chain-Linked

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Summary Rating (Rank)  Area 1. Size of Government Area 2. Legal Structure and Security of Property Rights Area 3. Access to Sound Money Area 4. Freedom to Trade Internationally Area 5. Regulation of Credit, Labor, and Business

Unadjusted

Summary Rating (Rank) 

1. Size of Government A. Government consumption

3.47 (140)

3.89 (140)

4.76 (138)

Rating Data

Rating Data

Rating Data

1.30

0.00

3.48

2.60 (31.20)

0.00 (45.48)

0.95 (36.76)

0.00 (62.50)

0.00 (85.23)

0.00 (83.75)

B. Transfers and subsidies C. Government enterprises and investment D. Top marginal tax rate

9.50

(i) Top marginal income tax rate

10.00 (17)

(ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

9.00 (25) 3.20

3.34

3.30

A. Judicial independence

3.10

B. Impartial courts

2.90

C. Protection of property rights

4.10

D. Military interference in rule of law and politics

3.30

3.33

3.33

E. Integrity of the legal system

5.00

5.00

5.00

F. Legal enforcement of contracts

2.30

2.30

2.30

G. Regulatory restrictions on sale of real property

1.40

2.78

2.74

1.30

5.03

5.24

A. Money growth

0.00 (53.90)

3.35 (33.23)

4.81 (25.94)

B. Standard deviation of inflation

0.00 (40.17)

4.27 (14.32)

3.89 (15.28)

C. Inflation: most recent year

5.00 (24.76)

7.51 (12.47)

7.25 (13.73)

D. Freedom to own foreign currency bank accounts

0.00

5.00

5.00

7.10

6.00

6.40

7.90

7.93

7.91

(ii) Mean tariff rate

8.50 (7.60)

8.54 (7.30)

8.54 (7.30)

(iii) Standard deviation of tariff rates

7.40 (6.60)

7.31 (6.72)

7.28 (6.79)

4.00

1.32

3.62

3. Access to Sound Money

4. Freedom to Trade Internationally A. Taxes on international trade

3.26 3.30

3.37 3.11

(i) Revenues from trade taxes (% of trade sector)

B. Regulatory trade barriers (i) Non-tariff trade barriers

6.70

(ii) Compliance cost of importing and exporting

1.40

1.32

C. Size of trade sector relative to expected

10.00

10.00

8.24

D. Black-market exchange rates

10.00

10.00

10.00

3.70

0.77

2.23

E. International capital market controls

4.49 2.75

(i) Foreign ownership / investment restrictions

5.80

(ii) Capital controls

1.50

0.77

0.77

4.50

5.10

5.36

A. Credit market regulations

6.20

6.45

7.16

(i) Ownership of banks

5.00

5.00

5.00

(ii) Foreign bank competition

9.00

9.00

9.00

(iii) Private sector credit

5.60

4.78

5.65

(iv) Interest rate controls / negative real interest rates

5.00

7.00

9.00

4.00

2.98

3.87

(i) Hiring regulations and minimum wage

3.30

3.30

3.33

(ii) Hiring and firing regulations

4.40

(iii) Centralized collective bargaining

7.60

(iv) Hours regulations

4.00

4.00

4.00

(v) Mandated cost of worker dismissal

4.60

4.62

4.98

(vi) Conscription

0.00

0.00

0.00

C. Business regulations

3.50

5.86

5.04

5. Regulation of Credit, Labor, and Business

B. Labor market regulations

3.70

4.60 6.34

(i) Price controls (ii) Administrative requirements

2.20

(iii) Bureaucracy costs

0.50

1.67

(iv) Starting a business

3.10

(v) Extra payments / bribes / favoritism

4.90

(vi) Licensing restrictions

3.20

4.49

4.31

(vii) Cost of tax compliance

7.00

6.95

6.84

7.93 6.14

6.02 3.47

Economic Freedom of the World: 2011 Annual Report  29

Argentina Chain-Linked

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

4.41 (85)

3.98 (97)

4.78 (91)

6.77 (35)

7.19 (32)

5.94 (96)

6.01 (93)

5.92 (102)

Area 1. Size of Government

6.10 (23)

5.22 (51)

6.18 (41)

8.22 (7)

7.78 (17)

7.56 (24)

6.37 (63)

6.24 (64)

Area 2. Legal Structure and Security of Property Rights

4.51 (53)

4.90 (61)

6.48 (37)

5.45 (61)

5.41 (68)

4.53 (92)

4.45 (96)

4.45 (94)

Area 3. Access to Sound Money

2.50 (104)

2.50 (106)

2.50 (109)

6.57 (63)

9.71 (4)

5.44 (114)

6.90 (89)

7.03 (90)

Area 4. Freedom to Trade Internationally

4.00 (73)

2.59 (91)

4.14 (89)

6.98 (43)

6.29 (82)

6.01 (91)

6.38 (81)

5.81 (93)

Area 5. Regulation of Credit, Labor, and Business

5.10 (58)

5.02 (59)

4.85 (81)

6.65 (22)

6.74 (33)

6.17 (76)

5.95 (94)

6.10 (91)

Summary Rating (Rank) 

Unadjusted

Summary Rating (Rank) 

4.35 (86) Rating Data

1. Size of Government

3.92 (101) Rating Data

4.65 (96)

6.76 (38)

7.19 (32)

Rating Data

Rating Data

Rating Data

5.92 (112)

5.99 (113)

5.90 (119)

Rating Data

Rating Data

Rating Data

6.10

5.22

6.18

8.22

7.78

7.60

6.37

6.24

A. Government consumption

6.91 (16.50)

7.94 (13.00)

8.53 (11.00)

8.06 (12.60)

6.88 (16.62)

7.00 (16.30)

6.20 (18.92)

5.68 (20.68)

B. Transfers and subsidies

7.49 (9.70)

6.95 (11.70)

8.17 (7.20)

7.33 (10.30)

7.22 (10.69)

8.30 (6.80)

8.28 (6.82)

8.28 (6.82)

C. Government enterprises and investment

4.00 (39.50)

4.00 (38.30)

4.00 (30.00)

6.00

6.00

D. Top marginal tax rate

6.00

2.00

4.00

7.50

7.00

5.00

5.00

5.00

6.00 (45)

2.00 (62)

7.00 (35)

9.00 (30)

8.00 (35)

7.00 (35)

7.00 (35)

7.00 (35)

1.00 (57)

6.00 (40)

6.00 (36-43)

3.00 (46)

3.00 (46)

3.00 (49)

6.03

5.45

5.41

4.50

4.45

4.45

A. Judicial independence

3.87

3.17

2.00

2.35

2.60

B. Impartial courts

4.20

5.18

2.60

2.21

2.40

C. Protection of property rights

4.57

3.72

3.20

3.19

2.75

D. Military interference in rule of law and politics

7.66

6.67

7.20

7.50

7.50

E. Integrity of the legal system

6.96

8.33

5.00

4.17

4.17

F. Legal enforcement of contracts

5.00

5.02

5.02

G. Regulatory restrictions on sale of real property

6.70

6.72

6.72

5.40

6.90

7.03

(i) Top marginal income tax rate (ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

3. Access to Sound Money

4.20

2.50

4.56

2.50

2.50

10.00 (8.50)

6.57

10.00 (6.44)

9.71

10.00 (11.00)

A. Money growth

0.00 (90.34)

0.00 (252.73)

0.00 (441.58)

7.07 (14.66)

9.50 (−2.48)

3.30 (33.40)

7.39 (13.06)

7.80 (10.99)

B. Standard deviation of inflation

0.00 (119.77)

0.00 (208.29)

0.00 (1198.84)

0.00 (52.44)

9.52 (1.20)

5.40 (11.56)

8.33 (4.18)

8.50 (3.74)

9.81 (−0.94)

6.80 (16.00)

C. Inflation: most recent year D. Freedom to own foreign currency bank accounts 4. Freedom to Trade Internationally A. Taxes on international trade

8.10 (9.64)

6.87 (15.66)

10.00

0.00 (92.02)

10.00

0.00 (620.84)

10.00

0.00 (2064.19)

10.00

9.23 (3.87)

10.00

5.00

5.00

5.00

4.42

2.87

4.29

6.93

6.29

6.00

6.38

5.81

4.05

3.07

3.19

7.46

7.47

6.50

6.55

6.26

(i) Revenues from trade taxes (% of trade sector)

3.67 (9.50)

1.53 (12.70)

3.40 (9.90)

7.53 (3.70)

7.92 (3.12)

5.60 (6.60)

5.58 (6.62)

5.58 (6.62)

(ii) Mean tariff rate

4.44 (27.80)

4.60 (27.00)

5.90 (20.50)

7.90 (10.50)

7.48 (12.60)

7.90 (10.60)

7.68 (11.60)

7.48 (12.60)

0.28 (24.30)

6.96 (7.60)

7.00 (7.50)

6.00 (10.00)

6.38 (9.05)

5.72 (10.71)

7.17

6.42

5.70

5.94

5.56

7.17

6.18

3.80

3.80

3.05

6.66

7.60

8.08

8.08

(iii) Standard deviation of tariff rates B. Regulatory trade barriers (i) Non-tariff trade barriers (ii) Compliance cost of importing and exporting C. Size of trade sector relative to expected

0.00

0.99

0.00

0.49

0.98

4.90

4.90

3.82

D. Black-market exchange rates

9.80

2.00

10.00

10.00

10.00

10.00

10.00

10.00

E. International capital market controls

0.00

0.00

0.00

9.53

6.58

2.90

4.51

3.40

9.06

9.31

5.90

5.17

5.26

(i) Foreign ownership / investment restrictions (ii) Capital controls

0.00

0.00

0.00

10.00

3.85

0.00

3.85

1.54

4.53

4.46

4.27

6.63

6.74

6.10

5.86

5.99

A. Credit market regulations

4.45

4.20

3.70

7.92

7.68

8.20

7.94

8.19

(i) Ownership of banks

5.00

5.00

5.00

5.00

5.00

5.00

5.00

5.00

8.63

7.33

8.00

8.00

8.00

5. Regulation of Credit, Labor, and Business

(ii) Foreign bank competition (iii) Private sector credit

8.34

7.61

6.09

7.61

6.95

9.80

9.78

9.78

(iv) Interest rate controls / negative real interest rates

0.00

0.00

0.00

10.00

10.00

10.00

9.00

10.00

3.73

3.70

3.46

5.94

6.11

5.10

5.18

5.32

5.95

4.42

5.60

5.60

3.90

3.00

3.00

5.28

2.50

2.87

2.76

B. Labor market regulations (i) Hiring regulations and minimum wage (ii) Hiring and firing regulations (iii) Centralized collective bargaining

5.18

5.18

5.18

5.18

4.83

4.60

3.44

3.32

(iv) Hours regulations

5.01

4.93

4.66

5.55

6.01

8.00

8.00

10.00

0.00

1.19

1.97

1.00

1.00

1.00

10.00

10.00

10.00

10.00

10.00

6.02

6.44

4.90

4.44

4.44

8.00

8.00

1.00

0.00

0.00

6.78

2.50

2.79

2.68

(v) Mandated cost of worker dismissal (vi) Conscription C. Business regulations (i) Price controls (ii) Administrative requirements (iii) Bureaucracy costs

6.70

7.50

7.10

5.52

5.74

(iv) Starting a business

6.22

4.83

8.90

9.01

9.01

(v) Extra payments / bribes / favoritism

3.16

5.07

5.00

3.72

3.57

(vi) Licensing restrictions

4.90

5.14

5.16

(vii) Cost of tax compliance

4.90

4.92

4.92

30  Chapter 2: Country Data Tables

Armenia 1980

Chain-Linked

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Summary Rating (Rank)  Area 1. Size of Government Area 2. Legal Structure and Security of Property Rights Area 3. Access to Sound Money Area 4. Freedom to Trade Internationally Area 5. Regulation of Credit, Labor, and Business

Unadjusted

Summary Rating (Rank) 

1. Size of Government

7.16 (44)

7.11 (50)

7.15 (43)

Rating Data

Rating Data

Rating Data

7.70

7.62

7.67

A. Government consumption

8.20 (12.30)

7.64 (14.04)

7.82 (13.42)

B. Transfers and subsidies

8.30 (6.60)

7.84 (8.44)

7.87 (8.32)

C. Government enterprises and investment

6.00

6.00

6.00

D. Top marginal tax rate

8.50

9.00

(i) Top marginal income tax rate (ii) Top marginal income and payroll tax rates

9.00

10.00 (20)

9.00 10.00 (20)

8.00

8.00 (26)

8.00 (26)

5.50

5.49

5.47

A. Judicial independence

2.10

2.10

2.71

B. Impartial courts

3.00

3.13

3.40

C. Protection of property rights

5.50

5.37

4.45

D. Military interference in rule of law and politics

5.80

5.83

5.83

E. Integrity of the legal system

5.00

5.00

5.00

F. Legal enforcement of contracts

7.20

7.16

7.16

G. Regulatory restrictions on sale of real property

9.80

9.83

9.77

9.20

8.88

9.44

2. Legal Structure and Security of Property Rights

3. Access to Sound Money A. Money growth

7.60 (12.20)

8.14 (9.30)

9.46 (2.71)

B. Standard deviation of inflation

9.40 (1.48)

9.18 (2.05)

8.97 (2.57)

C. Inflation: most recent year D. Freedom to own foreign currency bank accounts

9.90 (0.64)

8.21 (8.95)

9.32 (3.41)

10.00

10.00

10.00

6.60

6.61

6.49

7.70

8.77

8.82

(i) Revenues from trade taxes (% of trade sector)

9.40 (1.00)

8.75 (1.88)

8.91 (1.64)

(ii) Mean tariff rate

9.40 (3.00)

9.44 (2.80)

9.44 (2.80)

(iii) Standard deviation of tariff rates

4.40 (14.10)

8.11 (4.73)

8.11 (4.73)

5.20

6.42

6.64

(i) Non-tariff trade barriers

5.30

5.35

5.33

(ii) Compliance cost of importing and exporting

5.00

7.49

7.95

2.60

0.29

0.00

10.00

10.00

10.00

4. Freedom to Trade Internationally A. Taxes on international trade

B. Regulatory trade barriers

C. Size of trade sector relative to expected D. Black-market exchange rates E. International capital market controls

7.60

7.56

6.98

(i) Foreign ownership / investment restrictions

6.80

5.95

5.63

(ii) Capital controls

8.50

9.17

8.33

6.70

6.94

6.67

5. Regulation of Credit, Labor, and Business A. Credit market regulations

8.90

8.95

8.06

(i) Ownership of banks

10.00

10.00

10.00

(ii) Foreign bank competition

7.00

7.00

7.00

(iii) Private sector credit

9.70

9.82

6.22

(iv) Interest rate controls / negative real interest rates

9.00

9.00

9.00

6.00

6.12

6.23

(i) Hiring regulations and minimum wage

6.70

6.70

5.00

(ii) Hiring and firing regulations

5.10

6.03

5.79

(iii) Centralized collective bargaining

7.60

7.19

7.02

(iv) Hours regulations

8.00

8.00

10.00

(v) Mandated cost of worker dismissal

8.80

8.79

9.60

(vi) Conscription

0.00

0.00

0.00

C. Business regulations

5.20

5.75

5.72

(i) Price controls

5.00

5.00

5.00

(ii) Administrative requirements

3.00

3.73

3.42

(iii) Bureaucracy costs

2.90

6.31

6.52

(iv) Starting a business

9.40

9.49

9.49

(v) Extra payments / bribes / favoritism

5.20

3.74

3.64

(vi) Licensing restrictions

7.50

8.50

8.46

(vii) Cost of tax compliance

3.50

3.49

3.49

B. Labor market regulations

Economic Freedom of the World: 2011 Annual Report  31

Australia Chain-Linked

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

7.13 (11)

7.35 (10)

7.66 (11)

7.80 (9)

7.88 (10)

7.85 (10)

7.84 (8)

7.91 (5)

Area 1. Size of Government

5.08 (51)

4.42 (74)

5.35 (65)

5.68 (74)

5.47 (81)

6.38 (70)

6.80 (47)

6.67 (47)

Area 2. Legal Structure and Security of Property Rights

8.57 (14)

9.29 (9)

9.27 (15)

8.96 (10)

9.49 (3)

8.63 (9)

8.31 (11)

8.22 (11)

Area 3. Access to Sound Money

9.00 (9)

9.35 (10)

9.15 (18)

9.40 (28)

9.40 (27)

9.44 (30)

9.43 (21)

9.62 (9)

Area 4. Freedom to Trade Internationally

6.26 (38)

6.88 (26)

7.33 (24)

7.65 (26)

7.76 (32)

6.79 (58)

6.76 (65)

7.15 (38)

Area 5. Regulation of Credit, Labor, and Business

6.87 (11)

6.96 (11)

7.28 (10)

7.29 (9)

7.26 (12)

8.03 (15)

7.91 (14)

7.89 (14)

Summary Rating (Rank) 

Unadjusted

Summary Rating (Rank) 

1. Size of Government

6.89 (13)

7.10 (9)

7.28 (14)

7.78 (10)

7.88 (10)

7.92 (9)

7.91 (7)

7.98 (5)

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

5.08

4.42

5.35

5.68

5.47

6.40

6.80

6.67

A. Government consumption

4.93 (23.23)

4.77 (23.79)

5.20 (22.33)

5.47 (21.40)

4.79 (23.70)

4.70 (24.00)

4.54 (24.55)

4.69 (24.05)

B. Transfers and subsidies

7.38 (10.10)

6.89 (11.90)

7.22 (10.70)

6.27 (14.20)

7.09 (11.17)

6.80 (12.30)

7.15 (10.96)

6.51 (13.32)

C. Government enterprises and investment

6.00 (28.40)

4.00 (30.20)

6.00 (25.20)

7.00 (21.50)

7.00 (21.50)

10.00 (10.60)

10.00 (11.20)

10.00 (11.20)

D. Top marginal tax rate

2.00

2.00

3.00

4.00

3.00

4.00

5.50

5.50

2.00 (62)

2.00 (60)

3.00 (49)

4.00 (47)

3.00 (47)

4.00 (47)

6.00 (45)

6.00 (45)

3.00 (49)

4.00 (48)

3.00 (49)

4.00 (49)

5.00 (47)

5.00 (47)

7.86

8.96

9.49

8.60

8.31

8.22

A. Judicial independence

9.05

9.52

8.80

9.07

8.79

B. Impartial courts

9.00

9.69

8.30

6.77

6.99

C. Protection of property rights

7.32

8.27

9.00

8.62

8.11

D. Military interference in rule of law and politics

9.46

10.00

10.00

10.00

10.00

10.00

10.00

(i) Top marginal income tax rate (ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

7.26

7.88

E. Integrity of the legal system

9.80

9.17

9.17

F. Legal enforcement of contracts

6.20

6.23

6.23

G. Regulatory restrictions on sale of real property

8.30

8.29

8.26

3. Access to Sound Money

9.00

9.35

9.15

9.40

9.40

9.40

9.43

9.62

A. Money growth

8.57 (7.17)

9.50 (2.50)

8.06 (9.70)

8.43 (7.83)

9.19 (4.04)

8.60 (6.90)

8.71 (6.45)

8.94 (5.30)

B. Standard deviation of inflation

9.40 (1.51)

9.13 (2.17)

9.19 (2.02)

9.74 (0.64)

9.31 (1.72)

9.70 (0.79)

9.86 (0.34)

9.92 (0.20)

C. Inflation: most recent year

8.03 (9.84)

8.79 (6.06)

9.35 (3.26)

9.42 (2.90)

9.10 (4.48)

9.50 (2.67)

9.13 (4.35)

D. Freedom to own foreign currency bank accounts

9.64 (1.82)

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

6.57

7.23

7.48

7.51

7.76

6.80

6.76

7.15

7.35

7.60

6.46

7.71

8.43

8.40

8.52

8.76

(i) Revenues from trade taxes (% of trade sector)

7.60 (3.60)

7.87 (3.20)

7.93 (3.10)

8.80 (1.80)

9.06 (1.41)

9.00 (1.60)

9.17 (1.24)

9.17 (1.24)

(ii) Mean tariff rate

7.10 (14.50)

7.34 (13.30)

7.16 (14.20)

8.36 (8.20)

8.84 (5.80)

9.10 (4.30)

9.30 (3.50)

9.30 (3.50)

4.28 (14.30)

5.96 (10.10)

7.40 (6.50)

7.20 (7.10)

7.10 (7.25)

7.80 (5.50)

6.42

8.78

8.20

8.13

8.04

6.42

8.07

7.40

7.35

7.16

9.50

8.90

8.91

8.91

4. Freedom to Trade Internationally A. Taxes on international trade

(iii) Standard deviation of tariff rates B. Regulatory trade barriers (i) Non-tariff trade barriers (ii) Compliance cost of importing and exporting C. Size of trade sector relative to expected

5.52

5.36

4.77

5.17

5.47

2.40

2.40

4.14

D. Black-market exchange rates

9.80

10.00

10.00

10.00

10.00

10.00

10.00

10.00

E. International capital market controls

2.00

5.00

8.00

8.27

6.11

4.90

4.77

4.80

8.53

9.14

7.60

7.22

7.29

(i) Foreign ownership / investment restrictions (ii) Capital controls

2.00

5.00

8.00

8.00

3.08

2.30

2.31

2.31

6.53

6.62

6.56

7.34

7.26

8.40

8.24

8.22

A. Credit market regulations

8.38

8.67

9.68

9.04

8.95

9.50

9.50

9.50

(i) Ownership of banks

8.00

8.00

10.00

10.00

10.00

10.00

10.00

10.00

7.92

6.53

8.00

8.00

8.00

7.14

8.00

9.03

9.19

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

6.56

5.43

5.57

8.40

8.48

8.39

3.58

4.55

10.00

10.00

10.00

4.50

4.50

3.08

4.60

4.95

4.64

5.18

5.18

5.52

5.90

6.28

5.69

3.88

4.68

10.00

10.00

10.00

9.60

9.63

10.00

10.00

10.00

10.00

10.00

10.00

7.54

7.26

7.20

6.74

6.76

7.00

7.00

7.00

7.00

7.00

6.73

3.50

3.66

3.99

5. Regulation of Credit, Labor, and Business

(ii) Foreign bank competition (iii) Private sector credit (iv) Interest rate controls / negative real interest rates B. Labor market regulations (i) Hiring regulations and minimum wage (ii) Hiring and firing regulations (iii) Centralized collective bargaining

5.18

5.18

(iv) Hours regulations (v) Mandated cost of worker dismissal (vi) Conscription

10.00

10.00

10.00

C. Business regulations (i) Price controls

6.00

(ii) Administrative requirements (iii) Bureaucracy costs

7.21

6.20

5.30

1.93

2.00

(iv) Starting a business

6.80

7.37

9.90

9.93

9.93

(v) Extra payments / bribes / favoritism

9.16

9.01

8.90

8.59

8.35

(vi) Licensing restrictions

7.30

7.29

7.29

(vii) Cost of tax compliance

8.80

8.80

8.78

32  Chapter 2: Country Data Tables

Austria Chain-Linked

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

6.76 (16)

6.72 (20)

7.22 (20)

7.04 (28)

7.37 (21)

7.70 (15)

7.57 (14)

7.48 (15)

Area 1. Size of Government

3.14 (95)

3.05 (102)

3.11 (106)

2.82 (115)

2.77 (122)

5.23 (94)

5.07 (105)

4.85 (102)

Area 2. Legal Structure and Security of Property Rights

9.47 (5)

9.27 (11)

9.82 (11)

8.85 (12)

9.34 (5)

8.63 (9)

8.41 (9)

8.29 (10)

Area 3. Access to Sound Money

8.40 (13)

8.31 (23)

9.63 (10)

9.55 (18)

9.63 (9)

9.55 (17)

9.54 (7)

9.58 (12)

Area 4. Freedom to Trade Internationally

6.86 (26)

6.91 (24)

7.43 (21)

8.10 (16)

8.51 (10)

7.66 (23)

7.54 (33)

7.35 (27)

Area 5. Regulation of Credit, Labor, and Business

6.08 (30)

6.26 (27)

6.21 (34)

5.91 (52)

6.59 (37)

7.40 (27)

7.28 (26)

7.33 (25)

Summary Rating (Rank) 

Unadjusted

Summary Rating (Rank) 

1. Size of Government

6.38 (18)

6.35 (22)

6.78 (20)

7.03 (29)

7.37 (21)

7.72 (14)

7.59 (16)

7.50 (19)

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

3.14

3.05

3.11

2.82

2.77

5.20

5.07

4.85

A. Government consumption

4.46 (24.82)

4.35 (25.22)

4.40 (25.03)

4.01 (26.37)

4.16 (25.86)

4.60 (24.40)

4.22 (25.66)

3.87 (26.86)

B. Transfers and subsidies

4.11 (22.10)

3.84 (23.10)

4.03 (22.40)

3.27 (25.20)

2.93 (26.44)

2.80 (26.80)

2.54 (27.86)

C. Government enterprises and investment

2.00 (44.50)

2.00 (42.00)

2.00 (42.00)

2.00 (42.00)

2.00 (42.00)

D. Top marginal tax rate

2.00

2.00

2.00

2.00

2.00

3.50

3.50

3.50

2.00 (62)

2.00 (62)

4.00 (50)

4.00 (50)

4.00 (50)

4.00 (50)

4.00 (50)

4.00 (50)

0.00 (62)

0.00 (66)

0.00 (66)

3.00 (54)

3.00 (54)

3.00 (54)

8.35

8.85

9.34

8.60

8.41

8.29

A. Judicial independence

8.82

9.02

8.10

8.46

7.96

B. Impartial courts

7.72

9.02

8.60

7.17

6.98

C. Protection of property rights

7.73

8.65

9.10

8.95

8.59

D. Military interference in rule of law and politics

9.97

10.00

10.00

10.00

10.00

10.00

10.00

(i) Top marginal income tax rate (ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

8.04

7.88

E. Integrity of the legal system

10.00 (5.20)

10.00 (5.18)

2.02 (29.80) 10.00 (5.65)

10.00

10.00

10.00

F. Legal enforcement of contracts

6.70

6.38

6.38

G. Regulatory restrictions on sale of real property

7.90

7.92

8.12

9.63

9.60

9.54

9.58

3. Access to Sound Money

8.40

8.31

9.63

9.55

A. Money growth

9.97 (−0.17)

9.36 (3.22)

9.46 (2.69)

8.92 (5.39)

9.18 (4.10)

8.80 (6.10)

8.96 (5.21)

8.67 (6.67)

B. Standard deviation of inflation

9.64 (0.90)

9.51 (1.23)

9.75 (0.63)

9.69 (0.78)

9.80 (0.50)

9.90 (0.23)

9.85 (0.37)

9.74 (0.64)

C. Inflation: most recent year

9.00 (5.00)

9.38 (3.08)

9.31 (3.45)

9.57 (2.13)

9.53 (2.35)

9.50 (2.30)

9.36 (3.18)

D. Freedom to own foreign currency bank accounts

5.00

5.00

10.00

10.00

10.00

10.00

10.00

10.00

6.91

6.95

7.28

8.04

8.51

7.70

7.54

7.35

8.61

8.80

7.92

8.72

9.18

8.40

8.03

8.22

(i) Revenues from trade taxes (% of trade sector)

9.53 (0.70)

9.60 (0.60)

9.53 (0.70)

9.87 (0.20)

9.78 (0.33)

9.60 (0.60)

9.61 (0.59)

9.44 (0.84)

(ii) Mean tariff rate

7.68 (11.60)

8.00 (10.00)

8.26 (8.70)

8.66 (6.70)

9.52 (2.40)

9.50 (2.70)

8.88 (5.60)

8.94 (5.30)

5.96 (10.10)

7.64 (5.90)

8.24 (4.40)

6.10 (9.70)

5.61 (10.98)

6.29 (9.28)

8.13

9.15

8.40

8.36

8.31

8.13

8.80

7.80

7.64

7.53

9.50

8.90

9.08

9.08

4. Freedom to Trade Internationally A. Taxes on international trade

(iii) Standard deviation of tariff rates B. Regulatory trade barriers (i) Non-tariff trade barriers (ii) Compliance cost of importing and exporting C. Size of trade sector relative to expected D. Black-market exchange rates E. International capital market controls

5.74

5.78

5.33

4.83

6.12

6.00

5.89

5.02

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

2.00

2.00

5.00

8.50

8.11

5.50

5.40

5.18

9.00

9.30

7.90

7.71

7.29

(i) Foreign ownership / investment restrictions (ii) Capital controls

9.90 (0.49)

2.00

2.00

5.00

8.00

6.92

3.10

3.08

3.08

5.39

5.55

5.52

5.89

6.59

7.50

7.39

7.43

A. Credit market regulations

6.96

7.59

7.46

6.96

8.59

9.30

9.44

9.23

(i) Ownership of banks

5.00

5.00

5.00

5.00

10.00

10.00

10.00

10.00

6.52

5.73

8.00

8.00

8.00

(iii) Private sector credit

7.88

7.78

7.39

7.47

9.16

9.20

9.74

8.91

(iv) Interest rate controls / negative real interest rates

8.00

10.00

10.00

8.00

10.00

10.00

10.00

10.00

4.63

4.63

4.63

4.28

3.86

5.90

5.92

6.21

4.58

4.56

8.90

10.00

10.00

5. Regulation of Credit, Labor, and Business

(ii) Foreign bank competition

B. Labor market regulations (i) Hiring regulations and minimum wage (ii) Hiring and firing regulations

4.82

4.82

3.05

4.30

3.85

3.94

(iii) Centralized collective bargaining

4.49

4.49

4.49

4.49

3.50

2.80

2.15

2.33

(iv) Hours regulations

4.40

4.40

4.22

4.50

5.18

6.70

6.70

8.00

9.80

9.81

10.00

(v) Mandated cost of worker dismissal (vi) Conscription

5.00

5.00

5.00

C. Business regulations (i) Price controls

5.00

3.00

3.00

3.00

3.00

3.00

6.43

7.33

7.30

6.81

6.84

8.00

8.00

8.00

9.00

9.00

7.53

4.30

4.22

4.39

(ii) Administrative requirements (iii) Bureaucracy costs

6.52

7.43

5.50

1.34

1.46

(iv) Starting a business

3.72

5.42

8.80

8.88

8.87

(v) Extra payments / bribes / favoritism

7.48

8.27

8.90

8.49

8.41

(vi) Licensing restrictions

7.60

7.63

7.62

(vii) Cost of tax compliance

8.10

8.08

8.09

Economic Freedom of the World: 2011 Annual Report  33

Azerbaijan 1980

1985

1990

1995

2000

Chain-Linked

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Summary Rating (Rank)  Area 1. Size of Government Area 2. Legal Structure and Security of Property Rights Area 3. Access to Sound Money Area 4. Freedom to Trade Internationally Area 5. Regulation of Credit, Labor, and Business

Unadjusted

6.11 (104)

Summary Rating (Rank)  Rating Data

Rating Data

1. Size of Government

Rating Data

6.55 (86)

6.50 (84)

Rating Data

Rating Data

5.00

5.27

5.37

6.00 (19.60)

4.65 (24.19)

5.02 (22.92)

7.10 (11.20)

9.44 (2.57)

9.44 (2.57)

C. Government enterprises and investment

2.00

2.00

2.00

D. Top marginal tax rate

5.00

5.00

5.00

(i) Top marginal income tax rate

7.00 (35)

7.00 (35)

7.00 (35)

(ii) Top marginal income and payroll tax rates

3.00 (49)

3.00 (49)

3.00 (49)

5.70

6.40

5.96

A. Judicial independence

3.00

4.79

3.86

B. Impartial courts

3.40

4.88

4.19

C. Protection of property rights

4.40

5.36

4.76

D. Military interference in rule of law and politics

6.70

6.67

5.83

E. Integrity of the legal system

6.00

5.83

5.83

F. Legal enforcement of contracts

7.30

7.55

7.55

G. Regulatory restrictions on sale of real property

8.80

9.73

9.73

7.30

7.55

7.83

A. Government consumption B. Transfers and subsidies

7.09 (11.19)

2. Legal Structure and Security of Property Rights

3. Access to Sound Money A. Money growth

8.60 (7.20)

6.88 (15.60)

7.58 (12.09)

B. Standard deviation of inflation

7.80 (5.58)

7.49 (6.27)

4.00 (14.99)

C. Inflation: most recent year

7.70 (11.59)

D. Freedom to own foreign currency bank accounts

5.00

10.00

10.00

6.60

6.66

6.44

6.90

7.91

8.07

4. Freedom to Trade Internationally A. Taxes on international trade (i) Revenues from trade taxes (% of trade sector)

5.84 (20.79)

9.72 (1.40)

9.19 (1.21)

9.19 (1.21)

(ii) Mean tariff rate

7.90 (10.40)

8.18 (9.10)

8.22 (8.90)

(iii) Standard deviation of tariff rates

5.90 (10.30)

6.36 (9.10)

6.80 (8.01)

3.50

4.00

3.95

(i) Non-tariff trade barriers

4.40

4.81

4.21

(ii) Compliance cost of importing and exporting

2.60

3.19

3.69

7.70

5.67

4.59

10.00

10.00

10.00

B. Regulatory trade barriers

C. Size of trade sector relative to expected D. Black-market exchange rates E. International capital market controls

4.90

5.74

5.61

(i) Foreign ownership / investment restrictions

6.70

6.48

5.84

(ii) Capital controls

3.10

5.00

5.38

6.00

6.86

6.90

A. Credit market regulations

6.60

7.50

7.75

(i) Ownership of banks

5.00

5.00

5.00

(ii) Foreign bank competition

6.00

6.00

6.00

6.50

10.00

10.00

9.00

9.00

10.00

6.50

6.89

6.80

(i) Hiring regulations and minimum wage

6.70

10.00

8.33

(ii) Hiring and firing regulations

7.80

6.77

6.66

(iii) Centralized collective bargaining

7.60

7.59

8.02

(iv) Hours regulations

8.00

8.00

8.00

(v) Mandated cost of worker dismissal

8.00

7.96

8.79

(vi) Conscription

1.00

1.00

1.00

C. Business regulations

4.90

6.18

6.16

(i) Price controls

6.00

6.00

6.00

(ii) Administrative requirements

4.00

5.29

4.49

(iii) Bureaucracy costs

5.90

5.18

5.58

(iv) Starting a business

8.30

9.65

9.71

(v) Extra payments / bribes / favoritism

4.60

4.51

3.90

(vi) Licensing restrictions

5.70

6.87

6.84

(vii) Cost of tax compliance

0.00

5.79

6.57

5. Regulation of Credit, Labor, and Business

(iii) Private sector credit (iv) Interest rate controls / negative real interest rates B. Labor market regulations

7.66

6.52

34  Chapter 2: Country Data Tables

Bahamas Chain-Linked Summary Rating (Rank)  Area 1. Size of Government

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

6.57 (20)

6.51 (26)

6.54 (30)

6.40 (50)

6.63 (50)

7.10 (43)

7.11 (45)

7.10 (39)

8.45 (6)

8.47 (2)

8.51 (3)

8.19 (11)

7.79 (16)

8.06 (13)

8.29 (9)

8.29 (7)

6.08 (39)

6.06 (43)

5.19 (74)

6.35 (46)

7.85 (18)

7.64 (20)

7.49 (21)

Area 2. Legal Structure & Security of Property Rights Area 3. Access to Sound Money

6.25 (54)

6.48 (66)

7.02 (44)

7.05 (55)

6.87 (87)

6.82 (92)

6.82 (92)

7.15 (86)

Area 4. Freedom to Trade Internationally

4.80 (58)

4.89 (63)

4.33 (85)

4.65 (105)

5.24 (113)

4.37 (118)

4.30 (118)

4.06 (119)

Area 5. Regulation of Credit, Labor, and Business

6.43 (18)

6.70 (14)

6.82 (12)

6.90 (14)

6.90 (23)

8.32 (7)

8.49 (5)

8.50 (4)

Unadjusted

Summary Rating (Rank) 

1. Size of Government A. Government consumption B. Transfers and subsidies C. Government enterprises and investment D. Top marginal tax rate (i) Top marginal income tax rate

6.63 (15)

6.57 (19)

6.49 (31)

6.41 (46)

6.63 (50)

7.22 (42)

7.24 (40)

7.22 (40)

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

8.45

8.47

8.51

8.19

7.79

8.10

8.29

8.29

6.81 (16.85)

6.90 (16.54)

7.18 (15.60)

6.21 (18.90)

5.18 (22.40)

6.50 (18.00)

7.16 (15.66)

7.27 (15.28)

9.86 (1.00)

9.56 (2.10)

8.97 (4.29)

8.80 (5.00)

8.99 (4.20)

8.88 (4.63)

7.00 (24.20)

7.00

7.00

7.00

7.00

7.00

10.00 (0.50) 7.00 (24.20)

10.00 (0.10) 7.00 (24.20)

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (5–9)

10.00 (5–9)

10.00 (5–9)

10.00 (9)

(ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

5.19

6.35

8.50

7.13

A. Judicial independence

5.00

5.00

6.99

B. Impartial courts

6.56

7.07

C. Protection of property rights

3.00

3.00

7.90

7.70

7.00

D. Military interference in rule of law and politics

7.30

E. Integrity of the legal system

4.11

10.00

10.00

10.00

10.00

6.67

7.50

7.50

7.50

F. Legal enforcement of contracts

5.49

5.49

G. Regulatory restrictions on sale of real property

4.98

4.98

3. Access to Sound Money

5.72

6.25

6.48

5.70

7.02

7.05

6.87

6.80

6.82

7.15

A. Money growth

8.43 (7.84)

9.72 (1.41)

9.38 (3.08)

9.40 (2.99)

8.05 (9.74)

8.60 (6.90)

8.99 (5.05)

9.47 (2.66)

B. Standard deviation of inflation

8.58 (3.54)

7.88 (5.29)

9.32 (1.70)

9.35 (1.63)

9.64 (0.90)

9.00 (2.57)

9.20 (2.01)

9.56 (1.11)

C. Inflation: most recent year

8.00 (10.01)

8.31 (8.46)

9.37 (3.16)

9.44 (2.81)

9.79 (1.04)

9.70 (1.59)

9.10 (4.49)

9.59 (2.06)

D. Freedom to own foreign currency bank accounts

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

4.83

4.92

4.38

4.71

5.24

4.40

5.10

4.81

4. Freedom to Trade Internationally A. Taxes on international trade

4.32

3.67

3.60

3.13

3.33

4.30

4.59

3.66

(i) Revenues from trade taxes (% of trade sector)

4.60 (8.10)

3.80 (9.30)

3.60 (9.60)

3.13 (10.30)

3.67 (9.50)

4.10 (8.80)

5.15 (7.28)

5.15 (7.28)

(ii) Mean tariff rate

4.04 (29.80)

3.54 (32.30)

3.00 (35.00)

4.00 (30.20)

4.02 (29.90)

2.84 (35.80)

4.70 (13.30)

4.62 (13.46)

2.98 (17.54)

8.01

7.76

8.01

7.76

(iii) Standard deviation of tariff rates B. Regulatory trade barriers (i) Non-tariff trade barriers (ii) Compliance cost of importing and exporting C. Size of trade sector relative to expected

5.63

4.93

2.69

2.57

3.10

1.90

2.11

1.89

D. Black-market exchange rates

6.00

7.80

7.40

9.60

10.00

10.00

10.00

10.00

E. International capital market controls

0.00

0.00

0.00

0.00

1.54

1.50

0.77

0.77

(i) Foreign ownership / investment restrictions (ii) Capital controls 5. Regulation of Credit, Labor, and Business

0.00

0.00

0.00

0.00

1.54

1.50

0.77

0.77

6.98

7.27

6.82

6.90

6.90

8.30

8.85

8.86

A. Credit market regulations

8.62

9.38

9.73

10.00

10.00

9.80

9.75

9.75

(i) Ownership of banks

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

(ii) Foreign bank competition (iii) Private sector credit

7.86

8.13

9.20

10.00

10.00

9.30

9.25

9.25

(iv) Interest rate controls / negative real interest rates

8.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

B. Labor market regulations (i) Hiring regulations and minimum wage

9.40

9.44

10.00

10.00

10.00

10.00

(ii) Hiring and firing regulations (iii) Centralized collective bargaining (iv) Hours regulations (v) Mandated cost of worker dismissal

7.59

7.78

10.00

10.00

7.40

7.39

4.00

4.00

8.92

8.91

(vi) Licensing restrictions

7.33

7.30

(vii) Cost of tax compliance

9.35

9.35

(vi) Conscription

10.00

10.00

10.00

10.00

10.00

10.00

4.00

4.00

4.00

4.00

C. Business regulations (i) Price controls (ii) Administrative requirements (iii) Bureaucracy costs (iv) Starting a business (v) Extra payments / bribes / favoritism

Economic Freedom of the World: 2011 Annual Report  35

Bahrain Chain-Linked Summary Rating (Rank)  Area 1. Size of Government

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

7.46 (8)

6.85 (17)

6.85 (27)

6.93 (31)

7.28 (28)

6.92 (55)

7.27 (34)

7.24 (32)

7.26 (11)

6.00 (28)

5.91 (47)

6.18 (59)

6.80 (43)

6.48 (67)

6.58 (55)

6.56 (51)

5.72 (46)

5.70 (51)

5.90 (47)

5.86 (59)

5.39 (73)

6.09 (52)

6.07 (53)

Area 2. Legal Structure and Security of Property Rights Area 3. Access to Sound Money

8.10 (18)

8.61 (19)

8.79 (22)

9.43 (27)

9.12 (35)

8.82 (49)

9.09 (37)

9.00 (47)

Area 4. Freedom to Trade Internationally

7.70 (13)

7.31 (16)

7.30 (26)

6.81 (50)

7.71 (35)

7.44 (31)

7.82 (18)

7.74 (12)

Area 5. Regulation of Credit, Labor, and Business

6.70 (13)

6.59 (20)

6.54 (20)

6.33 (34)

6.90 (23)

6.50 (63)

6.77 (49)

6.80 (50)

Unadjusted

Summary Rating (Rank) 

1. Size of Government

7.54 (4)

6.90 (14)

6.85 (18)

6.93 (35)

7.28 (28)

7.03 (54)

7.62 (14)

7.59 (11)

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

7.26

6.00

5.91

6.18

6.80

6.50

6.58

6.56

A. Government consumption

3.25 (28.95)

0.00 (43.46)

0.00 (43.78)

1.41 (35.20)

3.78 (27.15)

2.90 (30.00)

2.81 (30.44)

2.72 (30.75)

B. Transfers and subsidies

9.81 (1.20)

9.64 (1.80)

9.30 (3.06)

9.43 (2.59)

9.00 (4.20)

9.52 (2.25)

9.53 (2.24)

C. Government enterprises and investment

6.00 (29.80)

4.00 (31.70)

4.00 (31.70)

4.00 (31.70)

4.00

4.00

4.00

D. Top marginal tax rate (i) Top marginal income tax rate

10.00 (0.00) 4.00 (31.70)

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (0)

10.00 (17)

10.00 (17)

(ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

5.72

5.70

5.90

5.86

A. Judicial independence B. Impartial courts

6.74

6.30

C. Protection of property rights

5.60

6.60

6.58

4.10

6.61

6.73

4.10

4.87

4.95

6.60

7.49

7.71

D. Military interference in rule of law and politics

6.11

5.00

5.00

5.00

5.00

E. Integrity of the legal system

6.96

8.33

8.30

8.33

8.33

F. Legal enforcement of contracts

4.79

4.79

G. Regulatory restrictions on sale of real property

9.12

8.53

3. Access to Sound Money

8.10

8.61

8.79

9.43

9.12

8.80

9.09

9.00

A. Money growth

6.38 (18.10)

8.46 (7.70)

9.60 (1.99)

9.24 (−3.82)

9.71 (1.46)

8.40 (8.00)

7.71 (11.44)

8.05 (9.77)

B. Standard deviation of inflation

6.81 (7.98)

6.33 (9.17)

6.92 (7.71)

8.70 (3.26)

6.91 (7.73)

7.40 (6.54)

9.35 (1.62)

8.51 (3.72)

C. Inflation: most recent year

9.22 (3.90)

9.64 (−1.82)

8.63 (6.84)

9.80 (1.00)

9.86 (−0.70)

9.50 (2.59)

9.29 (3.53)

D. Freedom to own foreign currency bank accounts 4. Freedom to Trade Internationally A. Taxes on international trade (i) Revenues from trade taxes (% of trade sector)

10.00

10.00

10.00

10.00

10.00

10.00

10.00

7.70

7.24

7.30

6.81

7.71

7.20

7.56

7.48

9.39

9.17

9.27

9.07

9.19

8.40

8.19

8.25

9.39 (0.91)

9.53 (0.70)

9.27 (1.10)

9.07 (1.40)

9.19 (1.21)

8.80 (1.80)

9.53 (0.70)

9.53 (0.70)

9.00 (5.10)

8.96 (5.20)

8.96 (5.20)

7.30 (6.70)

6.07 (9.83)

6.26 (9.36)

7.60

7.84

8.19

7.60

7.62

8.07

8.05

8.31

(ii) Mean tariff rate

8.80 (6.00)

(iii) Standard deviation of tariff rates B. Regulatory trade barriers (i) Non-tariff trade barriers (ii) Compliance cost of importing and exporting C. Size of trade sector relative to expected D. Black-market exchange rates E. International capital market controls

8.95

6.87

7.07

4.82

4.26

3.20

4.52

3.36

10.00

10.00

10.00

10.00

10.00

10.00

10.00

10.00

2.00

2.00

2.00

2.00

6.92

6.60

7.24

7.62

7.10

7.80

7.75

(i) Foreign ownership / investment restrictions (ii) Capital controls

9.44 (2.80)

10.00

2.00

2.00

2.00

2.00

6.92

6.20

6.67

7.50

7.07

6.95

6.54

6.33

6.90

7.10

8.28

8.32

A. Credit market regulations

8.71

8.35

8.80

8.11

10.00

9.50

9.25

9.25

(i) Ownership of banks

8.00

8.00

8.00

8.00

10.00

10.00

10.00

10.00

8.00

8.00

8.00

9.42

8.71

8.41

8.32

10.00

10.00

10.00

10.00

10.00

8.00

10.00

10.00

9.00

9.00

7.00

8.64

8.74

10.00

10.00 4.15

5. Regulation of Credit, Labor, and Business

(ii) Foreign bank competition (iii) Private sector credit (iv) Interest rate controls / negative real interest rates B. Labor market regulations (i) Hiring regulations and minimum wage (ii) Hiring and firing regulations

3.20

4.26

(iii) Centralized collective bargaining

7.90

7.96

8.28

10.00

10.00

(iv) Hours regulations (v) Mandated cost of worker dismissal

9.63

10.00

10.00

10.00

10.00

4.60

6.96

6.98

4.00

4.00

4.00

(ii) Administrative requirements

4.00

4.53

5.01

(iii) Bureaucracy costs

2.90

4.01

3.82

9.07

8.81

7.62

7.76

(vi) Licensing restrictions

9.90

9.86

(vii) Cost of tax compliance

9.60

9.60

(vi) Conscription

10.00

10.00

10.00

10.00

10.00

C. Business regulations (i) Price controls

4.00

4.00

4.00

(iv) Starting a business (v) Extra payments / bribes / favoritism

7.50

36  Chapter 2: Country Data Tables

Bangladesh Chain-Linked

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

3.63 (99)

3.94 (99)

4.68 (94)

5.45 (80)

5.82 (94)

5.88 (100)

5.94 (99)

6.11 (92)

Area 1. Size of Government

4.52 (70)

4.56 (70)

7.37 (12)

8.07 (13)

8.07 (11)

8.12 (12)

8.08 (12)

8.07 (12)

Area 2. Legal Structure and Security of Property Rights

2.34 (81)

2.27 (104)

2.25 (107)

4.63 (98)

3.47 (112)

3.17 (113)

3.27 (115)

3.78 (109)

Area 3. Access to Sound Money

4.64 (97)

6.10 (83)

6.95 (49)

6.42 (67)

7.02 (79)

6.65 (97)

6.39 (103)

6.74 (101)

Area 4. Freedom to Trade Internationally

2.12 (91)

2.01 (97)

1.75 (102)

3.08 (111)

5.05 (115)

5.19 (111)

5.52 (104)

5.40 (106)

Area 5. Regulation of Credit, Labor, and Business

4.42 (77)

4.67 (75)

5.20 (63)

5.00 (84)

5.47 (89)

6.28 (67)

6.43 (67)

6.57 (63)

Summary Rating (Rank) 

Unadjusted

Summary Rating (Rank) 

3.75 (100) Rating Data

1. Size of Government A. Government consumption

4.30 9.89 (6.38)

4.06 (96)

4.68 (94)

5.46 (80)

5.82 (94)

Rating Data

Rating Data

Rating Data

Rating Data

4.33 10.00 (5.39)

7.00 10.00 (4.82)

7.67 10.00 (5.33)

B. Transfers and subsidies

8.07

5.94 (109)

6.00 (112)

6.17 (103)

Rating Data

Rating Data

Rating Data

8.10

8.08

8.07

10.00 (5.60)

9.70 (7.00)

9.81 (6.63)

9.83 (6.59)

9.28 (3.15)

9.80 (1.30)

9.50 (2.32)

9.47 (2.45)

C. Government enterprises and investment

2.00 (44.40)

2.00 (46.60)

2.00 (47.10)

4.00 (34.00)

4.00 (30.03)

4.00 (30.00)

4.00

4.00

D. Top marginal tax rate

1.00

1.00

9.00

9.00

9.00

9.00

9.00

9.00

1.00 (60)

1.00 (60)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

9.00 (25)

2.44

5.02

3.47

3.00

3.07

3.55

2.50

4.13

3.98

3.91

4.22

3.00

3.41

3.30

2.02

4.70

4.13

4.07

(i) Top marginal income tax rate (ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

2.54

2.46

A. Judicial independence B. Impartial courts C. Protection of property rights D. Military interference in rule of law and politics

5.25

3.33

4.60

2.50

5.00

E. Integrity of the legal system

6.96

3.33

3.30

4.17

4.17

F. Legal enforcement of contracts

1.20

1.15

1.15

G. Regulatory restrictions on sale of real property

1.60

2.02

3.20

3. Access to Sound Money

4.64

6.10

6.95

6.42

7.02

6.60

6.39

6.74

A. Money growth

7.03 (14.86)

7.84 (10.82)

9.62 (1.89)

7.99 (10.03)

9.07 (4.64)

8.60 (7.20)

8.05 (9.77)

8.63 (6.85)

B. Standard deviation of inflation

4.23 (14.43)

8.76 (3.10)

9.16 (2.10)

9.05 (2.38)

9.46 (1.36)

9.40 (1.38)

9.28 (1.81)

9.40 (1.51)

C. Inflation: most recent year

7.32 (13.39)

7.79 (11.07)

9.03 (4.87)

8.65 (6.73)

9.56 (2.21)

8.60 (7.04)

8.22 (8.90)

8.92 (5.42)

D. Freedom to own foreign currency bank accounts

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2.24

2.12

1.79

3.14

5.05

5.50

5.81

5.68

4. Freedom to Trade Internationally A. Taxes on international trade

0.53

0.00

0.64

1.42

5.19

5.80

6.48

6.53

(i) Revenues from trade taxes (% of trade sector)

1.07 (13.40)

0.00 (17.90)

1.93 (12.10)

4.27 (8.60)

5.33 (7.00)

4.10 (8.80)

5.89 (6.17)

5.99 (6.01)

(ii) Mean tariff rate

0.00 (99.90)

0.00 (86.00)

0.00 (102.20)

0.00 (81.20)

5.68 (21.60)

6.60 (16.80)

7.04 (14.80)

7.06 (14.70)

0.00 (50.40)

0.00 (26.10)

4.56 (13.60)

6.50 (8.70)

6.51 (8.73)

6.53 (8.67)

4.73

4.50

5.86

5.66

4.73

5.40

5.46

5.18

3.70

6.26

6.13

(iii) Standard deviation of tariff rates B. Regulatory trade barriers (i) Non-tariff trade barriers (ii) Compliance cost of importing and exporting C. Size of trade sector relative to expected

2.39

2.33

0.00

1.63

2.41

2.80

4.31

3.92

D. Black-market exchange rates

0.00

0.00

0.00

4.40

10.00

10.00

10.00

10.00

E. International capital market controls

0.00

0.00

0.00

0.00

2.93

4.10

2.39

2.31

5.86

7.50

4.79

4.62

(i) Foreign ownership / investment restrictions (ii) Capital controls

0.00

0.00

0.00

0.00

0.00

0.80

0.00

0.00

5.03

5.31

5.22

5.03

5.47

6.50

6.67

6.80

A. Credit market regulations

3.44

4.19

5.76

5.12

5.91

8.20

8.19

8.14

(i) Ownership of banks

0.00

0.00

0.00

0.00

2.00

5.00

5.00

5.00

5.85

8.00

8.00

8.00

5. Regulation of Credit, Labor, and Business

(ii) Foreign bank competition (iii) Private sector credit

4.31

6.56

7.28

7.37

8.05

9.60

9.74

9.57

(iv) Interest rate controls / negative real interest rates

6.00

6.00

10.00

8.00

10.00

10.00

10.00

10.00

6.55

6.80

6.37

6.54

(i) Hiring regulations and minimum wage

4.60

6.70

5.60

5.57

(ii) Hiring and firing regulations

4.97

6.00

5.94

6.09

(iii) Centralized collective bargaining

6.63

7.50

6.35

6.86

10.00

10.00

10.00

B. Labor market regulations

(iv) Hours regulations (v) Mandated cost of worker dismissal

0.40

0.36

0.73

10.00

10.00

10.00

10.00

3.96

4.50

5.45

5.71

0.00

6.00

6.00

6.00

(ii) Administrative requirements

7.55

2.40

2.44

3.15

(iii) Bureaucracy costs

5.73

2.40

6.41

6.37

(iv) Starting a business

4.58

7.90

8.21

9.04

(v) Extra payments / bribes / favoritism

1.91

2.30

2.46

2.67

(vi) Licensing restrictions

5.20

5.98

6.14

(vii) Cost of tax compliance

5.50

6.61

6.61

(vi) Conscription

10.00

10.00

10.00

10.00

0.00

0.00

C. Business regulations (i) Price controls

Economic Freedom of the World: 2011 Annual Report  37

Barbados Chain-Linked Summary Rating (Rank)  Area 1. Size of Government

1980

1985

1990

1995

2000

2005

2008

2009

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

Rating (Rank)

5.86 (36)

6.23 (28)

6.14 (41)

6.08 (62)

6.09 (81)

6.26 (87)

5.95 (97)

6.06 (93)

6.27 (22)

6.38 (17)

6.42 (32)

6.40 (46)

6.85 (39)

6.59 (63)

5.58 (90)

5.61 (80)

6.11 (37)

6.09 (42)

4.76 (92)

5.20 (73)

5.63 (65)

5.34 (75)

5.32 (74)

Area 2. Legal Structure and Security of Property Rights Area 3. Access to Sound Money

5.06 (92)

6.67 (52)

6.67 (57)

7.19 (50)

6.70 (91)

6.29 (107)

6.10 (109)

6.68 (104)

Area 4. Freedom to Trade Internationally

5.57 (44)

5.42 (54)

5.02 (72)

5.49 (95)

5.07 (114)

4.54 (117)

4.47 (116)

4.47 (117)

Area 5. Regulation of Credit, Labor, and Business

6.19 (26)

6.61 (18)

6.57 (19)

6.56 (26)

6.61 (35)

8.25 (9)

8.35 (6)

8.35 (8)

Unadjusted

Summary Rating (Rank) 

1. Size of Government A. Government consumption B. Transfers and subsidies

5.88 (37)

6.22 (27)

6.04 (42)

6.02 (66)

6.09 (81)

6.60 (79)

6.33 (95)

6.50 (84)

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

Rating Data

6.27

6.38

6.42

6.40

6.85

6.60

5.58

5.61

6.09 (19.28)

4.52 (24.62)

4.69 (24.07)

5.09 (22.70)

3.91 (26.70)

4.40 (24.90)

3.32 (28.71)

3.44 (28.30)

10.00 (0.00)

8.40 (6.30)

5.50 (17.02)

10.00 (12.00)

10.00 (3.70)

10.00 (0.20)

C. Government enterprises and investment

8.00 (19.00)

D. Top marginal tax rate

1.00 1.00 (60)

10.00 (0.00)

10.00 (0.00) 7.00 (22.78)

1.00

3.00

3.50

3.50

3.50

3.50

3.50

1.00 (60)

4.00 (50)

5.00 (40)

5.00 (40)

5.00 (40)

5.00 (40)

5.00 (40)

2.00 (54)

2.00 (53)

2.00 (53)

2.00 (53)

2.00 (53)

2.00 (53)

5.70

4.60

5.20

8.00

7.83

7.80

A. Judicial independence

5.00

5.00

8.10

7.84

7.89

B. Impartial courts

6.29

7.61

7.20

6.46

6.40

C. Protection of property rights

3.00

3.00

7.30

7.83

7.69

9.40

9.20

9.20

(ii) Top marginal income and payroll tax rates 2. Legal Structure and Security of Property Rights

5.72

D. Military interference in rule of law and politics E. Integrity of the legal system

10.00 (3.68)

5.50 (17.02)

8.00 (18.30)

(i) Top marginal income tax rate

10.00 (11.90)

10.00 (0.50)

10.00 (3.68)

4.11

F. Legal enforcement of contracts G. Regulatory restrictions on sale of real property 3. Access to Sound Money

5.06

6.67

6.67

7.19

6.70

6.30

6.10

6.68

A. Money growth

7.17 (14.16)

8.92 (5.41)

9.12 (4.38)

9.32 (−3.38)

7.89 (10.55)

7.70 (11.70)

7.11 (14.45)

8.22 (8.88)

B. Standard deviation of inflation

7.59 (6.03)

8.59 (3.52)

8.64 (3.39)

9.49 (1.28)

9.40 (1.50)

8.70 (3.23)

8.92 (2.71)

9.21 (1.96)

C. Inflation: most recent year

5.49 (22.56)

9.18 (4.12)