The Index of Economic Freedom covers 10 freedoms - from property rights to entrepreneurship - in 186 countries.
Note: For the 2015, most data covers the second half of 2013 through the first half of 2014. To the extent possible, the information considered for each factor was current as of June 30, 2014. It is important to understand that some factors are based on historical information. For example, the monetary policy factor is a 3-year weighted average rate of inflation from January 1, 2011, to December 31, 2013.
Last updated by source: 2021-01-29
| Dataset type: | Time-Series |
| Dataset level: | Country |
(Miller et al., 2021)
The business freedom score encompasses 10 components, all weighted equally, based on objective data from the World Bank's Doing Business study (in 2005-2006; previously other data sources were being used): - Starting a business - procedures (number) - Starting a business - time (days) - Starting a business - cost (% of income per capita) - Starting a business - minimum capital (% of income per capita) - Obtaining a license - procedures (number) - Obtaining a license - time (days) - Obtaining a license - cost (% of income per capita) - Closing a business - time (years) - Closing a business - cost (% of estate) - Closing a business - recovery rate (cents on the dollar) Each of these raw components is converted into a scale graded from 0 to 100, where 100 represents the maximum degree of business freedom.
More about this variableThe Economic Freedom index uses 10 specific freedoms, some as composites of even further detailed and quantifiable components: - Business freedom (hf_business) - Trade freedom (hf_trade) - Fiscal freedom (hf_fiscal) - Freedom from government (hf_govt) - Monetary freedom (hf_monetary) - Investment freedom (hf_invest) - Financial freedom (hf_financ) - Property rights (hf_prights) - Freedom from corruption (hf_corrupt) - Labor freedom (hf_labor). Each of these freedoms is weighted equally and turned into an index ranging from 0 to 100, where 100 represents the maximum economic freedom. Although changes in methodology have been undertaken throughout the measurement period, continuous backtracking has been used to maximize comparability over time.
More about this variableThe financial freedom factor measures the relative openness of each country's banking and financial system by determining: the extent of government regulation of financial services; the extent of state intervention in banks and other financial services; the difficulty of opening and operating financial services firms (for both domestic and foreign individuals); and government influence on the allocation of credit. The country's financial climate is measured as an overall score between 0 and 100, where 100 represent the maximum degree of financial freedom.
More about this variableThe score for the fiscal health component is based on two sub-factors, which are weighted as follows in calculating the overall component score: - Average deficits as a percentage of GDP for the most recent three years (80 percent of score) - Debt as a percentage of GDP (20 percent of score) In most cases, the Index uses general government deficit and debt data that include all levels of government such as federal, state, and local. In cases where such general government data are not available, data on central government expenditures are used instead. For a number of countries, particularly developing countries, statistics related to budget balance as a percentage of GDP are subject to frequent revisions by data sources such as the IMF.
More about this variableScale from 0 to 100, where 100 indicates very little corruption. Corruption erodes economic freedom by introducing insecurity and uncertainty into economic relationships. The score for this component is derived primarily from Transparency International's Corruption Perceptions Index (CPI) for 2011, which measures the level of corruption in 183 countries.
More about this variableScoring of the freedom from government factor is based on two components: Government expenditure as a percentage of GDP, Revenues generated by state-owned enterprises (SOEs) and property as a percentage of total government revenue. Government expenditure as a percentage of GDP is weighted as two-thirds of the freedom from government factor score, and revenue from SOEs is weighted as one-third. In cases where SOE data does not exist, the data is excluded from the factor score. The country's freedom from government ranges between 0 and 100, where 100 represents the maximum degree of freedom from government.
More about this variableThis factor scrutinizes each country's policies toward foreign investment, as well as its policies toward capital flows internally, in order to determine its overall investment climate. The country's investment freedom ranges between 0 and 100, where 100 represent the maximum degree of investment freedom.
More about this variableThe score for the judicial effectiveness component is derived by averaging scores for the following three sub-factors, all of which are weighted equally: - Judicial independence - Quality of the judicial process - Favoritism in obtaining judicial decisions. Each of these sub-factors is derived from numerical data sets that are normalized for comparative purposes. For a few countries, comparable data were not available for every sub-factor. In each of these cases, a score was computed for the missing sub-factor based on the country's relative percentile ranking on the other sub-factors.
More about this variableThe new labor freedom factor is a quantitative factor based on objective data from the World Bank's Doing Business study. It provides reliable cross-country data on regulations concerning minimum wages, laws inhibiting layoffs, severance requirements, and measurable regulatory burdens on hiring, hours, and so on. Specifically, four quantitative components are equally weighted as 25 percent of the labor freedom factor: Minimum wage, Rigidity of hours, Difficulty of firing redundant employees, Cost of firing redundant employees. The country's labor freedom score ranges from 0 to 100, where 100 represent the maximum degree of labor freedom.
More about this variableThe score for the monetary freedom factor is based on two components: The weighted average inflation rate for the three most recent years, Price controls. The weighted average inflation (WAI) rate for the three most recent years serves as the primary input into an equation that generates the base score for monetary freedom (MF). The extent of price controls is then assessed as a penalty of up to 20 percent subtracted from the base score. The country's monetary freedom ranges between 0 and 100, where 100 represents the maximum degree of monetary freedom.
More about this variableThis factor scores the degree to which a country's laws protect private property rights and the degree to which its government enforces those laws. It also accounts for the possibility that private property will be expropriated. In addition, it analyzes the independence of the judiciary, the existence of corruption within the judiciary, and the ability of individuals and businesses to enforce contracts. The less certain the legal protection of property is and the greater the chances of government expropriation of property are, the higher a country's score is. The country's property rights score ranges from 0 and 100, where 100 represents the maximum degree of protection of property rights.
More about this variableTax burden is a composite measure that reflects marginal tax rates on both personal and corporate income and the overall level of taxation (including direct and indirect taxes imposed by all levels of government) as a percentage of gross domestic product (GDP). With an equal weighting system, it allows a country to achieve a score as high as 67 percent based on two of the components even if it receives a score of 0 percent on the third. The country's fiscal freedom ranges between 0 and 100, where 100 represent the maximum degree of fiscal freedom.
More about this variableThe trade freedom score is based on two inputs: The trade-weighted average tariff rate, Non-tariff barriers (NTBs). Weighted average tariffs is a purely quantitative measure and accounts for the basic calculation of the score. The presence of NTBs in a country affects its trade freedom score by incurring a penalty of up to 20 percentage points, or one-fifth of the maximum score. The country's trade freedom ranges between 0 and 100, where 100 represents the maximum degree of trade freedom.
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