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1
2007 Index of
Economic Freedom
OUTLINE
1. What’s New?
2. Results
3. How Economic Freedom is Measured
4. Freedom and Prosperity
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What’s New?
1. Continuity! Ranks, Scores, Usability
2. New Academic Advisory Board
3. New % Scores: 0-100 replaces 5-1
4. New Methodology: More Data-driven
5. New Labor Freedom
6. New Country Page Design
7. New Regions: Europe. Americas.
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RESULTS: Top 10
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Hong Kong
Singapore
Australia
United States
New Zealand
United Kingdom
Ireland
Luxembourg
Switzerland
Canada
89.3%
85.7%
82.7%
82.0%
81.6%
81.6%
81.3%
79.3%
79.1%
78.7%
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RESULTS: Distribution
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10 Biggest* Economies
United States
China
Japan
India
Germany
United Kingdom
France
Italy
Russia
Brazil
WORLD
82.0%
54.0%
73.6%
55.6%
73.5%
81.6%
66.1 %
63.4%
54.0%
60.9%
60.6%
* In terms of total GDP
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Measuring Freedom:
2007 Advisory Board
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William W. Beach, co-chairman, The Heritage Foundation
Tim Kane, co-chairman, The Heritage Foundation
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Maria Sophia Aguirre, Catholic University of America
Donald J. Boudreaux, George Mason University
Ike Brannon, Economist, Washington, D.C.
Simeon Djankov, World Bank
Axel Dreher, ETH Zurich
Clive Granger, University of California, San Diego
Douglas Holtz-Eakin, Council on Foreign Relations
Garett Jones, Southern Illinois University Edwardsville
Mordechai “Max” Kreinin, Michigan State University
Philippe Lacoude, Economist, Paris, France
Richard Roll, University of California, Los Angeles
Xavier Sala-i-Martin, Columbia University
Friedrich Schneider, University of Linz
Aaron Smith, University of California, Davis
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Measuring Freedom:
The 10 Economic Freedoms
There are 10 Freedoms, each measured 0-100.
Overall score is a simple average (equal weights).
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Business Freedom
Trade Freedom
Fiscal Freedom
Fdm. from Government
Monetary Freedom
Investment Freedom
Financial Freedom
Property Rights
Fdm. from Corruption
Labor Freedom
- Ease of starting business
- Tariffs and barriers
- Tax rates and revenue
- State spending & ownership
- Inflation and price controls
- Free flow of capital
- Banking institutions
- Physical & intellectual
- Perception of corruption
- Flexibility of labor market
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Measuring Freedom:
Revised Methodology
10 Freedoms (New Methodology*)
10 Factors (Old Methodology)
Regulation
Trade Policy
Fiscal Burden
Government Intervention
Monetary Policy
Wages and Prices
Foreign Investment
Banking and Finance
Property Rights
Informal Market




Business Freedom
Trade Freedom
Fiscal Freedom
Freedom from Government
  Monetary Freedom




+
Investment Freedom
Financial Freedom
Property Rights
Freedom from Corruption
Labor Freedom
*New methodology is applied to all previous years, 1995-2007
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Measuring Freedom:
Time Series Continuity
2006 to 2007
Continuity
(100 = no change)
Explanation
1995 to 2007
Continuity
(100 = no change)
Explanation
New Data in 2005
Business Freedom
100
50
Trade Freedom
100
100
Fiscal Freedom
100
100
Freedom from Government
100
100
Monetary Freedom
95
New Data in 2007
95
New Data in 2007
Investment Freedom
90
New Scale in 2007
90
New Scale in 2007
Financial Freedom
90
New Scale in 2007
90
New Scale in 2007
Property Rights
90
New Scale in 2007
90
New Scale in 2007
Freedom from Corruption
100
50
New Data in 2002
Labor Freedom
100
0
Introduced in 2004
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Economic Freedom and
GDP Per Capita
Note: log scale
Per Capita GDP (PPP)
Sources: World Bank, World
Development Indicators
Online, at
publications.worldbank.org/su
bscriptions/WDI (subscription
required); Central Intelligence
Agency, The World Factbook
2005, at
www.cia.gov/cia/publications/
factbook/index.html;
International Monetary Fund,
World Economic Outlook
database, April 2006, at
www.imf.org/external/pubs/ft/
weo/2006/01/data/index.htm;
and Tim Kane, Kim R.
Holmes, and Mary Anastasia
O’Grady, 2007 Index of
Economic Freedom
(Washington, D.C.: The
Heritage Foundation and Dow
Jones & Company, Inc.,
2007), at
www.heritage.org/index.
$100,000
$10,000
$1,000
$100
20
30
40
50
60
70
80
90
100
Economic Freedom Score
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