economic freedom of the world 2013 exsum

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Economic Freedomof the World

2013 Annual Report

James Gwartney Robert Lawson Joshua HallFlorida State University Southern Methodist University West Virginia University

with

Alice M. Crisp Bodo Knoll Hans Pitlik Martin Rode

Florida State University University of Hohenheim Austrian Institute University of Navarraof Economic Research

2013


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Fraser Institute 2013 www.fraserinstitute.org www.freetheworld.com

Copyrigh 2013 by he Fraser Insiue. All righs reserved. No par o his book may be reproduced in

any manner whasoever wihou writen permission excep in he case o brie quoaions embodied in

criical aricles and reviews.

Te auhors o his book have worked independenly and opinions expressed by hem are, hereore, heir

own and do no necessarily reec he opinions o he supporers, rusees, or sa o he Fraser Insiue.

Tis publicaion in no way implies ha he Fraser Insiue, is rusees, or sa are in avor o, or oppose

he passage o, any bill; or ha hey suppor or oppose any paricular poliical pary or candidae.

Published in cooperaion wih he Economic Freedom Nework

Cover design by Bill Ray

Prined and bound in Canada

Data available to researchers

Te ull daa se, including all o he daa published in his repor as well as daa omited due o limied

space, can be downloaded or ree a . Te daa le available here conains

he mos up-o-dae and accurae daa or he Economic Freedom o he World index. Some variable

names and daa sources have evolved over he years since he rs publicaion in 1996; users should

consul earlier ediions oEconomic Freedom of the World or deails regarding sources and descripions

or hose years. All ediions o he repor are available in PDF and can be downloaded or ree rom

. However, users are always srongly encouraged o use he daa rom his

mos recen daa le as updaes and correcions, even o earlier years daa, do occur. Users doing long-erm or longiudinal sudies are encouraged o use he chain-linked index as i is he mos consisen

hrough ime. I you have diculy downloading he daa, please conac Fred McMahon via e-mail

o . I you have echnical quesions abou he daa isel, please conac

Joshua Hall or Rober Lawson .

Please cie he daa in your bibliography as:

Auhors: James Gwarney, Rober Lawson, and Joshua Hall

ile: 2013 Economic Freedom Daase, published inEconomic Freedom of the World: 2013 Annual Report

Publisher: Fraser Insiue

Year: 2013

URL:

Cite this publicationAuhors: James Gwarney, Rober Lawson, and Joshua Hall

ile:Economic Freedom of the World: 2013 Annual Report

Publisher: Fraser Insiue

Dae o publicaion: 2013

Digial copy available romand

Publishing history

See page 274 or a lis o al l volumes oEconomic Freedom of the World and associaed publicaions.

Cataloguing Information

Gwarney, James D.

Economic reedom o he world annual repor / James D. Gwarney.

Annual.

Descripion based on: 1997

2013 issue by James Gwarney, Rober Lawson, and Joshua Hall, wih Alice M. Crisp, Bodo Knoll, Hans

Pilik, and Marin Rode.

Issued also online.

ISSN 1482-471X; ISBN 978-0-88975-262-7 (2013 ediion).

1. Economic hisory--1990- --Periodicals. 2. Economic indicaors--Periodicals.

I. Fraser Insiue (Vancouver, B.C.) II. ile


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www.freetheworld.com www.fraserinstitute.org Fraser Institute 2013

Table of Contents

Executive Summary / v

Chapter 1 Economic Freedom o the World in 2011 / 1

Chapter 2 Country Data ables / 25

Chapter 3 Institutions and Economic, Political, and Civil Liberty in Afica / 179by Alice M. Crisp and James Gwarney

Chapter 4 Economic Freedom, Democracy, and Lie Satisaction / 215by Marin Rode, Bodo Knoll, and Hans Pilik

Appendix Explanatory Notes and Data Sources / 235

About the Authors / 249

About the Contributors / 250

Acknowledgments / 251

Te Economic Freedom Network / 252


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Economic Freedom of the World: 2013 Annual Report v


Executive Summary

Economic Freedom of the World

Te index published inEconomic Freedom of the World measures he degree o whichhe policies and insiuions o counries are supporive o economic reedom. Tecornersones o economic reedom are personal choice, volunary exchange, ree-dom o compee, and securiy o privaely owned propery. Fory-wo variables are

used o consruc a summary index and o measure he degree o economic reedomin ve broad areas:

1 Size o Governmen;

2 Legal Sysem and Propery Righs;

3 Sound Money;

4 Freedom o rade Inernaionally;

5 Regulaion.

Since our rs publicaion in 1996, numerous sudies have used he daa pub-lished inEconomic Freedom of the World o examine he impac o economic ree-dom on invesmen, economic growh, income levels, and povery raes. Virually

wihou excepion, hese sudies have ound ha counries wih insiuions andpolicies more consisen wih economic reedom have higher invesmen raes,more rapid economic growh, higher income levels, and a more rapid reducionin povery raes.1

Te EFW index now covers 152 counries and erriories.2 Daa are available orapproximaely 100 naions and erriories back o 1980, and many back o 1970. 3Tis daa se makes i possible or scholars o analyze he impac o boh cross-coun-ry dierences in economic reedom and changes in ha reedom across a hree-

decade ime rame.

1 For a review, see Hall, Joshua, and Rober Lawson (2013). Economic Freedom o he World: An

Accouning o he Lieraure. Contemporary Economic Policy. .

2 Hisorical daa are provided or 153 naions in Chaper 2: Counry Daa ables. However, due o

evens in Syria, daa or 2011 are quesionable and, hereore, have no been shown in he ables.

For he same reason, Syria is no included his year among he 152 counries ranked in he index.

3 A comprehensive daa se is available a .
http://onlinelibrary.wiley.com/doi/10.1111/coep.12010/abstracthttp://onlinelibrary.wiley.com/doi/10.1111/coep.12010/abstracthttp://www.freetheworld.com/http://www.freetheworld.com/http://onlinelibrary.wiley.com/doi/10.1111/coep.12010/abstracthttp://onlinelibrary.wiley.com/doi/10.1111/coep.12010/abstract


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vi Economic Freedom of the World: 2013 Annual Report


Economic freedom from around the world

Average chain-linked rating

Te average chain-linked economic reedom raing or he 101 counries wih ra-ings since 1980 has increased rom 5.34 in 1980 o 5.82 in 1990 o 6.74 in 2000 andnally o 6.87 in 2011. Afer a global average drop beween 2007 and 2009, he aver-age summary raing increased modesly in boh 2010 and 2011, hough i remainsbelow is peak level o 6.92 in 2007. Te chain-linked index is used or his compari-

son because i is mos appropriae or measuremen o changes across ime.

Countries included

Tere are 152 counries included in his years index, up rom 144 las year. Tenew counries added o he index (wih daa or boh 2010 and 2011) are BruneiDarussalam, Cape Verde, Te Gambia, Lebanon, Suriname, Swaziland, ajikisan,imor-Lese, and Yemen. Because o he civil war and he unreliabiliy o he daasince 2011, he raing or Syria has been emporarily suspended, hough hisoricaldaa are included in Chaper 2: Counry Daa ables.

Top-rated countries

Hong Kong and Singapore, once again, occupy he op wo posiions. Te ohernaions in he op en are New Zealand, Swizerland, Unied Arab Emiraes,Mauriius, Finland, Bahrain, Canada, and Ausralia.

Other major countries

Te rankings o some oher major counries are: Unied Kingdom (12 th), UniedSaes (17th), Germany (19th), Japan (33rd), Souh Korea (33rd), France (40th), Ialy(83rd), Mexico (94th), Russia (101st), Brazil (102nd), India (111th), and China (123rd).

Lowest-rated countries

Te en lowes-raed counries are: Algeria, Democraic Republic o Congo, Burundi,

Cenral Arican Republic, Angola, Chad, Zimbabwe, Republic o Congo, Myanmar, and,in las place, Venezuela. Eigh o he counries in he botom en are locaed in Arica.

Nations that are economically free out-perform

non-free nations in indicators of well-being

Naions in he op quarile o economic reedom had an average per-capia GDPo $36,446 in 2011, compared o $4,382 or naions in he botom quarile in2011US(PPP) dollars (Exhibi .).

In he op quarile, he average income o he poores 10% was $10,556, comparedo $932 in he botom quarile in 2011US(PPP) dollars (Exhibi .). Ineresingly,he average income o he poores 10% in he mos economically ree naions ismore han wice he overall average income in he leas ree naions.

Lie expecancy is 79.2 years in naions in he op quarile compared o 60.2 yearsin hose in he botom quarile (Exhibi .).

Poliical and civil liberies are considerably higher in economically ree naions hanin unree naions (Exhibi .).


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Economic Freedom of the World: 2013 Annual Report vii


Chapter 1: Economic Freedom of the World in 2011

James Gwartney, Robert Lawson, and Joshua Hall

In chaper one, he auhors oEconomic Freedom of the World provide an overviewo he repor and discuss why economic reedom is imporan. Tey also review heconinuing decline o economic reedom in he Unied Saes.

Chapter 2: Country Data Tables

Deailed hisorical inormaion is provided or each o he 152 counries and errio-ries in he index as well as or Syria, hough 2011 daa are no included or his naion.

Chapter 3: Institutions and Economic, Political, and Civil Liberty in Africa

Alice M. Crisp and James Gwartney

In his chaper akes a close look a he economic, poliical, and civil insiuions o26 Arican counries. Te economic, poliical, and civil insiuions o a counry areinerrelaed and hey work as a combinaion o inuence he operaion o an econ-omy. o a large degree, researchers know he bundle o economic insiuions andpolicies ha lead o economic growh and prosperiy. Bu, economic insiuionsare an ougrowh o poliical insiuions and he choices ha emanae rom he

poliical process. Similarly, civil liberies inuence he public discourse and herebyhave an impac on boh economic and poliical decision-making. Because o heseinerrelaionships, i is imporan o consider insiuional qualiy in all o heseareas. Chaper 3 provides deailed inormaion on he insiuional srenghs and

weaknesses o each o he 26 Arican economies.

Chapter 4: Economic Freedom, Democracy, and Life Satisfaction

Martin Rode, Bodo Knoll, and Hans Pitlik

Te research presened in his chaper indicaes ha boh economic reedom andpoliical democracy exer an independen impac on lie saisacion over and abovehe impac o per-capia income levels and oher indicaors o maerial well-being.

Tis is rue even afer accouning or he inuence o marriage, belie in God, rus,regional dierences, and oher variables ha prior research has idenied as impor-an deerminans o lie saisacion. Moreover, he impac o economic reedomand democracy on lie saisacion is quie subsanial, paricularly when boh hedirec and indirec eecs hrough higher income levels and lower raes o unem-ploymen are aken ino accoun.


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viii Economic Freedom of the World: 2013 Annual Report


Data available to researchersTe ull daa se, including all o he daa published in his repor as well as daa omi-ed due o limied space, can be downloaded or ree a .Te daa le available here conains he mos up-o-dae and accurae daa or heEconomic Freedom o he World index. Some variable names and daa sourceshave evolved over he years since he rs publicaion in 1996; users should consulearlier ediions oEconomic Freedom of the World or deails regarding sources and

descripions or hose years. All ediions o he repor are available in PDF and canbe downloaded or ree a . However, users are alwayssrongly encouraged o use he daa rom his mos recen daa le as updaes andcorrecions, even o earlier years daa, do occur. Users doing long-erm or longiu-dinal sudies are encouraged o use he chain-linked index as i is he mos consis-en hrough ime.

I you have diculy downloading he daa, please conac Fred McMahon viae-mail o . I you have echnical quesions abou hedaa isel, please conac Joshua Hall or Rober Lawson.

Please cie he daa in your bibliography as:

Authors James Gwarney, Rober Lawson, and Joshua HallTitle 2013 Economic Freedom Daase, published inEconomic Freedom of the World: 2013

Annual Report

Publisher Fraser InsiueYear 2013URL .

economic freedom of the world 2013 exsum

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