Economic Freedom Index Research Articles

Impact of Economic Freedom on Corruption Revisited in ASEAN Countries: A Bayesian Hierarchical Mixed-Effects Analysis

Conceptual and applied studies assessing the linkage between economic freedom and corruption expect that economic freedom boosts economic growth, improves income, and reduces levels of corruption. However, most of them have concentrated on developed and developing groups, while the Association of Southeast Asian Nations (ASEAN) countries have drawn much less attention. Empirical findings are most often conflicting. Moreover, previous studies performed rather simple frequentist techniques regressing one or some freedom indices on corruption that do not allow for grasping all the aspects of economic freedom as well as capturing variations across countries. The study aims to investigate the effects of ten components of economic freedom index on the level of corruption in ten ASEAN countries from 1999 to 2018. By applying a Bayesian hierarchical mixed-effects regression via a Monte Carlo technique combined with the Gibbs sampler, the obtained results suggest several findings as follows: (i) In view of probability, the predictors property rights, government integrity, tax burden, business freedom, labor freedom, and investment freedom have a strongly positive impact on the response perceived corruption index; (ii) Government spending, trade freedom, and financial freedom exert a strongly negative effect, while the influence of monetary freedom is ambiguous; and (iii) There is an existence of not only random intercepts but also random coefficients at the country level impacting the model outcome. The empirical outcome could be of major importance for more efficient corruption controlling in emerging countries, including ASEAN nations.

TESTING THE RELATIONSHIP BETWEEN THE STOCK MARKET INDEX AND VOLATILITY INDEX IN BRICS-T COUNTRIES BY PANEL DATA ANALYSIS

Sermaye piyasalarındaki yatırım atmosferinin önde gelen göstergelerinden biri olan volatilite gelişmekte olan ülke piyasalarını önemli ölçüde etkilemektedir. Türkiye son yıllarda gösterdiği performans ile küresel ekonomiye yön veren gelişmekte olan ülkelerden oluşturulan BRICS grubuna aday olarak gösterilmektedir. Bu çalışmada, uluslararası volatilite göstergesi olarak kabul edilen korku endeksinin BRICS ülkeleri ve Türkiye hisse senedi piyasaları üzerinde yaratacağı etkinin ortaya çıkarılması amaçlanmıştır. Bu kapsamda; korku endeksi, döviz kuru, tüketici güven endeksi ve özgürlük endeksinin kompozit hisse senedi endeksi üzerindeki etkisi panel veri analizi yöntemleri ile incelenmiştir. Analiz sonuçlarına göre, borsa endeksi üzerinde korku endeksi ve döviz kurunun negatif, özgürlük endeksinin ise pozitif etkisi bulunduğu belirlenmiştir. Tüketici güven endeksi ile borsa endeksi arasında anlamlı bir ilişki tespit edilememiştir.

Estimación Logit y Probit del impacto en el tamaño relativo del sector agropecuario ante las variaciones del ingreso per cápita y el índice de libertad económica

In this work, it was proposed to answer the question: What is the relative size of the agricultural sector in a country in the face of improvements in economic freedom and the growth of the per-capita income of its inhabitants? Therefore, it was sought to estimate, probabilistically, the impact on the percentage of composition of agriculture in GDP (PAGP) in the face of marginal increases in the Index of Economic Freedom (IEF) and the Gross Domestic Product Per Capita (GDPbp); the methodology used was the estimation of econometric models for a limited dependent variable of the dichotomous form, specifically, Logit and Probit Models. For this estimation, PAGP was defined as a dependent variable, taking the value of one (1) countries with economies with PAGP greater than or equal to the median PAGP of all countries and zero (0) otherwise, IEF and GDPbp; were specified as independent variables. All data used are cross-sectional and correspond to the year 2018. The results obtained indicate that the unit variations of IEF and GDPbp generate a high probability that a country's PAGP is below the median PAGP of all countries, that is, as economic freedom and average income in a country increases, its agricultural sector has a high probability of losing relative weight in the economic composition of the country.

Economic aspects of indexing democracy

Indices of democratic development are the important issue of contemporary political studies. Their calculation allows to rank countries by a set of parameters and, accordingly, to assess trends in political changes. In this context, some authors pay attention to the indicators of development of national economies. In general, when it comes to determining the type of political regime, it is necessary to consider the various dimensions (e. g. institutional, socio-cultural). To avoid conclusions based on incomplete information and focus on separate – institutional, cultural, or economic – aspects, it is necessary to use an interdisciplinary approach, which, in addition, allows to consider the maximum number of factors of sustainability of democratic trends. Considering the scholarly debate over the interdependence of political and economic development, the paper compares the indices of democracy with economic development estimates, as well as the Gross domestic product of the countries selected for consideration. Quantitative data were analyzed with the calculation of the corresponding correlation coefficients. Initially, the author identified the relationship between indicators of democratic development to obtain confirmation of the feasibility of further comparison. As the obtained coefficients for the selected group of countries are reliable, the methodology applied to the considered countries is valid for application for other regions for which the listed research institutions carry out evaluations. This allowed the use of democratic development indicators to compare them with assessments of market economy development. Accordingly, there is a correlation between democratic and economic development – indicators of democracy status, democracy index and ranking of countries on the democracy scale on the one hand, and the index of economic freedom, market economy status, indicators of institutional ranking of economic freedoms – one the other. Moreover, it is emphasized that theoretical generalizations about the relationship between democracy / democratization and the level of economic development should take into account not only the correlation between expert assessments, but also the relationship between democratization and GDP. On the other hand – such a relationship is nonlinear, and the conditions of democracy, external and internal factors, as well as the national context are significant. Key words: democracy, political regime, economic development, modernization theory, Gross domestic product.

Transition from Vertical to Horizontal Industrial Policy in Ukraine: Effects on Industrial Sector Growth

This paper explores the determinants of industry’s value added growth related to transition of Ukrainian industrial policy from vertical to horizontal type in 2015. The method used is econometric modelling through building multiple linear regression, where the real rates of value added growth from year to year represent the dependent variable. As explanatory variables the real rates of capital investments, structural changes, institutional indicators of regulatory quality and index of economic freedom as well as dummy-variables denoting the periods associated with industrial policy transit were introduced into the model. The main finding of the study is the revealed negative effect of horizontal industrial policy on industrial sector productivity. Other results showed the significant contribution of capital investments growth rates and government support’s share in the State budget expenditures. The included institutional determinants as well as structural changes indicator didn’t play any significant role in providing of industry’s value added growth. The results of modelling were used in recommendations for matrix (combination of vertical and horizontal instruments) policy implementation in Ukraine.

НАПРЯМИ ПІДВИЩЕННЯ ІНВЕСТИЦІЙНОЇ ПРИВАБЛИВОСТІ УКРАЇНИ НА СВІТОВІЙ АРЕНІ

In the conditions of deepening of transformational processes of development and formation of market relations in the system of world economy all branches of economy of Ukraine undergo significant transformations and reorientation. Under the influence of internal and external factors, the market environment changes. Despite the great resource potential, Ukraine fails to gain a leading position compared to economically developed countries. Therefore, it is advisable to study the current state of Ukraine's economy, analyze the dynamics of key indicators, assess the place in the world economy and find possible ways to improve the situation. As a result of the study, the main indicators characterizing the economic development of Ukraine for 2010-2020 were considered. Among them, the index of global competitiveness, the index of investment attractiveness occupy a special place. The analysis of the dynamics of these indicators revealed negative trends due to the aggravation of economic crises, hostilities in the east, the annexation of the Autonomous Republic of Crimea, destabilization of social and political life, the COVID-19 pandemic. It is determined that the main reason for this situation is the bankruptcy of domestic enterprises due to the low level of competitiveness and the inability to adapt to changing conditions of the external and internal environment and attract investment. The study proposed methodological approaches to assessing the level of investment attractiveness of the country and proved the importance of the ability not only to create new competitive advantages, but also to keep existing ones under the influence of a number of factors; Ukraine's ranking positions in comparison with other countries of the world according to the index of business conditions, the index of economic freedom, the index of global competitiveness, world competitiveness and world digital competitiveness are determined. It is established that the deterioration of rating places on these indicators requires the immediate development of new regulations, the choice of a new strategy for attracting investment, as well as the effective use of levers of influence on the economy.

Determining factors of investment in mineral exploration

The objective of this study was to identify the critical factors that favour attracting a greater investment in mineral exploration. An explanatory methodology was used. Through econometric models, the relationship and/or interaction between the variables that had an impact on the defined dependent variable was demonstrated. This study used a new proxy variable to quantify geological potential: mining production value. Likewise, a new variable, land area/population, and other variables such as exploration expenditures, index of economic freedom, mining reserves, surface area and population were included. Following the formulations of previous studies, three models were estimated: linear logarithm, normalised and competitiveness model. It is concluded that, the greater the geological potential and investment climate, the higher investment in mineral exploration will be. Meanwhile, high population density leads to the opposite effect. Future studies should consider other variables or even new formulations to more robustly explain the competitiveness of countries to appear attractive to mineral investments.

International Estimates of Russia’s Investment Image

Foreign direct investments are considered to be one of the drivers to stimulate Russian economic development. Increase of funds is highly dependent on current investment image. This article covers different estimates of Russia’s investment image by international rating agencies and research institutes. Sovereign credit ratings are considered to be major indicators of investment image. Leading foreign rating agencies currently estimate Russian credit rating as attractive for investors. Russia has entrenched a credible and consistent policy framework that will deliver improved macroeconomic stability, reduce the impact of oil price volatility on the economy, and support increased resilience to external shocks. Fitch agency considers that Russia's strengthened policy mix, underpinned by a more flexible exchange rate, a strong commitment to inflation-targeting and a prudent fiscal strategy. However, the continued threat of sanctions' escalation will weigh on Russia's external financing flexibility, investment and growth prospects. Some agencies underline the drawbacks of Russia economic development. These drawbacks are dependence on oil and natural gas export, weak banking system, bad corporate management. Current Ratings of the economic development depend greatly on how long the pandemic and social distancing will take place and on the measures that are taken place for increasing economic activities. Section 2 reviews the major estimates of Russian investment climate by different international research institutes. This section shows that Index of economic freedom, developed by Heritage Foundation and Wall Street Journal is of topical interest to potential investors. Russia has improved the position in ranking of economic freedom, but some serious drawbacks still exist. Some ways to improve Russia’s investment image are being suggested in Section 3.

Determining factors of investment in mineral exploration

The objective of this study was to identify the critical factors that favour attracting a greater investment in mineral exploration. An explanatory methodology was used. Through econometric models, the relationship and/or interaction between the variables that had an impact on the defined dependent variable was demonstrated. This study used a new proxy variable to quantify geological potential: mining production value. Likewise, a new variable, land area/population, and other variables such as exploration expenditures, index of economic freedom, mining reserves, surface area and population were included. Following the formulations of previous studies, three models were estimated: linear logarithm, normalised and competitiveness model. It is concluded that, the greater the geological potential and investment climate, the higher investment in mineral exploration will be. Meanwhile, high population density leads to the opposite effect. Future studies should consider other variables or even new formulations to more robustly explain the competitiveness of countries to appear attractive to mineral investments.

ОЦІНКА СТАНУ БІЗНЕС-СЕРЕДОВИЩА В УКРАЇНІ В КОНТЕКСТІ УПРАВЛІНСЬКОЇ ДІЯЛЬНОСТІ

The condition of the business environment in the country plays a significant role in ensuring the efficiency of the economy, achieving stable economic growth and development. For Ukraine, the issue of the condition of the business environment is of particular importance given the high level of integration of the national economy into the global economic system and the country's large-scale need for investment resources. Investors, as a general rule, make balanced management decisions when choosing investment projects, based on a number of factors, including the condition of the business environment in a particular country. The purpose of the article is to conduct a comparative analysis of the most well-known approaches to assessing the state of the business environment, in particular in Ukraine, and to identify possible ways to improve such an assessment. The article analyzes the main existing approaches to assessing the condition of the business environment, particularly in Ukraine. The evaluation capabilities of a number of rating indicators (rates) that are developed by international organizations (Doing Business, The Global Competitiveness Index, The IMD World Competitiveness Ranking, Index of Economic Freedom, Index EBA) have been determined, in terms of their compliance with the requirements of complexity and validity for the adoption of management solutions at the micro and macro levels. The corresponding rating indicators for Ukraine are analyzed in dynamics. The advantages and disadvantages of the most famous of the existing rating indicators for assessing the business environment are demonstrated. It is concluded that rating indicators are focused predominantly on assessing the conditions (primarily regulatory) of the business environment, and not on assessing the actual results of the functioning of economic entities within a certain business environment. The high value of the subjective (expert) factor in their formation was noted. It is proposed to supplement the existing approaches to assessing the business environment with indicators of a resulting nature, in particular, indicators of foreign investment, which is of particular importance for the Ukrainian economy. Comparisons of the dynamics of rating indicators and indicators of direct foreign investment for the Ukrainian economy are carried out.

ІМІДЖ УКРАЇНИ В ГЛОБАЛЬНОМУ ЕКОНОМІЧНОМУ ПРОСТОРІ

The article examines the image of Ukraine in the global economic space by assessing and comparing the world's leading ratings in the field of national branding, ratings that affect the image of Ukraine and some industry ratings. The transformation of the country's foreign economic priorities in the direction of purposeful promotion of its interests and the formation of a national brand in the global economic space are all due to intensified international competition, globalization of the world economy in terms of intensification of innovation processes and rapid growth of scientific and technological progress. In a difficult socio-economic and geopolitical situation for Ukraine, the issues of forming a national brand are very relevant, and its research has a considerable scientific interest. In this context, the national brand can become one of the ways to integrate the Ukrainian economy into the global economic space and support it at the appropriate level in the system of world economic relations. The role of the national brand in the positioning of the state in the international arena is analyzed. The interdependence of internal and external image of Ukraine is revealed. It is very important to intensify Ukraine's role in the world stage and strengthen its global competitiveness. Ukraine's place in the leading research on the national brand has been identified such as: the competitiveness index, the global innovation index, the economic freedom index, the ease of doing business index, etc. The strengths and weaknesses of positioning the image of Ukraine in the global economic space are analyzed. Prospects and recommendations for the development of the national brand of Ukraine are highlighted. The purpose of this work is to analyze the image of Ukraine in the global economic space and the peculiarities of the development of its national brand to gain a competitive advantage in the face of increasing international competition. Ukraine has every opportunity to rise in the system rankings. If we analyze their individual elements then we can see that the country receives the lowest values estimations in that direction that is characterized by the governance quality.

İnovasyon ile Küresel Rekabetçilik Düzeyi Arasındaki İlişkide Ekonomik Serbestliğin Düzenleyici Rolü (The Moderator Role of Economic Freedom in the Relationship Between Innovation and Global Competitiveness)

Purpose – This study aims to determine the moderator role of economic freedom in the relationship between the economies' ability of the country's economies and global competitiveness levels. Design/methodology/approach – The data obtained from three global reports (Global Innovation Index, Economic Freedom Index, and Global Competitiveness Index) of 2019 were analyzed to test the research model. The scope of the research consists of 125 countries that have data in all three global reports. The research hypothesis test was carried out with Hayes's (2018) Process Macro program for the moderator effect analysis and the SPSS 25 statistical program for correlation analysis. Findings – Regression analysis results showed that countries' economic freedom levels have a moderator role in the relationship between innovation and global competitiveness. Notably, when the country's innovation capability exceeds the medium level, low economic freedom positively affects global competitiveness. Discussion – The results reveal that economic regulations are a critical factor that should not be neglected in countries' innovation policies to increase their global competitiveness. Accordingly, it is recommended that global enterprises consider the candidate country's innovation power and economic regulations in foreign direct investment decisions.

ДОСЛІДЖЕННЯ ІНВЕСТИЦІЙНОГО ПОТЕНЦІАЛУ УКРАЇНИ ТА НІДЕРЛАНДІВ: ПОРІВНЯЛЬНА ХАРАКТЕРИСТИКА

In the article the authors substantiated the importance of studying world experience to increase the country's investment attractiveness, revealed the essence of the country's investment potential, and pointed out the main factors that affect the level of investment potential and used in calculating the country's investment attractiveness. Authors have considered the consequences of the COVID-19 pandemic for global investment flows. The place of Ukraine and the Netherlands in global investment flows is assessed. A comparative assessment of the natural-geographical, consumer, labor potential of Ukraine and the Netherlands was conducted. In particular, it was found that Ukraine has a high level of investment potential (favorable geographical location, natural resources, large consumer market and highly educated and at the same time relatively cheap labor), but foreign investors are reluctant to invest here, and in the Netherlands the situation with natural resources, geographical, labor, consumer potential is slightly worse, however, over the past decade the country remains one of the largest recipients of foreign direct investment in Europe. It is established that the reasons for this situation are the legislative, political, social, economic risks in Ukraine and the Netherlands and their impact on the investment climate in both countries. The tax policy, the level of corruption, quality and efficiency of public administration in both countries and their impact on foreign direct investment flows are studied. The ranking positions of the studied countries according to the indicators of investment attractiveness, namely the Index of Ease of Doing Business, the Global Innovation Index, the Corruption Perceptions Index, the Economic Freedom Index, and the Prosperity Index are analyzed. Based on the results of the study, priority areas of work in the field of increasing the investment potential of our state are formulated, namely: overcoming corruption, reforming the judiciary, regulatory and law enforcement agencies, stimulating innovative research and development, infrastructure development, investment freedom, protection of private property.

An Empirical View on the Determinants of Sustainable Economic Development: Evidence from EU(28) Member States

Sustainable development represents a comprehensive approach that focuses on economic, social and environmental aspects in order to meet the needs of the present without compromising the ability of future generations. The main aim of the paper is to reveal the impact of selected global multicriteria indices (through Global Innovation Index, Doing Business Index, Economic Freedom Index, Corruption Perception Index and Human Development Index) on sustainable development (expressed by Sustainable Economic Development Assessment) within EU(28) countries for the period of 2011 to 2018. Secondary data were processed using panel data regression analysis. Results of average score in the field of sustainable economic development showed that Finland (84.5) achieved the best-performed, while the worst position was recorded by Romania (56.5). Looking at the selected indices average scores, the leading position was indicated in the case of Denmark (80.5) and the worst results was obtained by Greece (57.6). Based on the results of the panel regression analysis, to the key determinants influencing the sustainable economic growth of the EU(28) countries belong such variables as innovation activity, business environment, corruption issues and human resources. The presented findings provide valuable insight toward to strategic priorities review, as well as, it can also help governments move from plans to action.

Соціально-економічний розвиток і його взаємозв'язок з показниками розширення прав, економічних свобод і можливостей

The article analyzes the key aspects and factors of the socio-economic development of society. On the basis of the studied theoretical approaches, the essence of the concept of «economic development» is specified. The most important components of the new quality of growth are defined. Both the need to and possibility of supplementing the indicator of the country’s success in socio-economic development (HDI), which is annually calculated by UNDP and reflects the relationship between the assessment of longevity in the country, the level of literacy and education of the population and the standard of living, indicators of empowerment, economic freedoms and opportunities, is substantiated. Based on the correlation analysis of indicators of the human development index, on the one hand, and the human development index, taking into account indicators of empowerment, economic freedoms and opportunities, as well as the index of life satisfaction, political and economic freedom, on the other hand, it has been proved that there is a direct strong connection between these indicators. This testifies the direct impact of the extent of life satisfaction, economic independence and political participation on the socio-economic development of society. A comparison of the composition of the resulting clusters with the rating of countries by the level of human development within the traditional HDI showed that there are certain differences. Thus, the largest number of countries with a very high level of human development when applying indicators of empowerment have lost their status. Similar results are observed for many other countries that, according to the HDI rating, taking into account empowerment, found themselves in a lower level of human development in a group of countries. The research showed that none of the countries moved in the ranking to a higher group. The obtained results confirmed the hypothesis that there is a fairly strong relationship between the levels of overall satisfaction with life, democracy and economic freedom and socio-economic development.

Determinants of Option Markets Liquidity: An Empirical Analysis on European Markets

This paper attempts to discover the macroeconomic determinants of liquidity in option markets, which is measured by the open interest, the volume (number of transactions), the implied volatility and the bid-ask spread. The macroeconomic determinants of each European economy employed in this study are 1) the gross domestic product, the gross domestic product per capita, the unemployment rate, the income tax rate, the corporate tax rate, the population, the bank capital-to-assets ratio, the inflation, the 10-year government bond yield rate, 2) the market capitalization (of listed domestic companies), the Standard & Poor’s global equity indices (annual % change), the stocks traded (turnover ratio of domestic shares (%) and total value), which show the breadth of a country’s capital markets, as well as 3) indices like the economic freedom, the freedom from corruption, the fiscal freedom, the business freedom, the investment freedom, the financial freedom. Panel data linear regressions are performed to find evidence that the liquidity of the option markets is mainly affected by macroeconomic and capital market determinants, whereas the economic freedom indicators play a less significant role. The findings can be of use to the policymakers and option market authorities who wish to increase the liquidity of these markets. The novelties introduced by this study are the consideration of macroeconomic variables as determinants of option market liquidity and the subsequent use of these determinants in order to make policy recommendations.

The Nexus Between Economic Freedom and Tourist Arrivals: Evidence from Mediterranean Countries

Mediterranean countries are indispensable places of tourism with their world-famous shores, wonderful climate and impressive historical places. The aim of this paper is to investigate the relationship between tourist arrivals and economic freedom indicators such as government integrity, tax burden, government spending, business freedom and trade freedom. For this purpose, the panel vector autoregression (PVAR) method was used for a Mediterranean countries sample covering the period from 1996 to 2016. The results of causality testing showed that the tourist arrivals have a bidirectional causality relationship with each explanatory variable, while the coefficient estimates showed that an increase in economic freedom indices affected tourist arrivals negatively in Mediterranean countries. That is, economic freedoms do not mean an advantage for tourists without supportive public policies for tourism. The test results suggest that policymakers should take into account the various aspects of the tourism sector, particularly natural resources and environmental factors, while making policies that increase economic freedom in Mediterranean countries.

Análisis comparativo del índice de Libertad económica de 2019 entre Colombia y otros países de Suramérica

El Índice de Libertad Económica (ILE), elaborado por The Heritage Foundation, ha proporcionado una referencia frente a la política económica para aquellos países que aspiran a un dinamismo y prosperidad económica superior. Este artículo pretende resaltar la importancia que tiene mejorar los índices de Libertad Económica en Colombia, para lo cual se comparan y analizan los resultados de los factores implícitos en la Libertad Económica de las PYMES, realizando el contraste entre Colombia y diferentes países de América del Sur, y discutiendo los aspectos que inciden en el estado actual de cada factor a la luz cifras de crecimiento económico y financiero, y de un rastreo de información documental. El análisis muestra la importancia que tienen las decisiones que se toman en cuanto a las políticas económicas del Gobierno, la necesidad de encaminar el Estado, a uno más eficiente, transparente y de menor regulación, permitiendo el desarrollo empresarial y social en la nación, dando mejores condiciones a la sociedad con la reducción de índices de desempleo, pobreza y desigualdad.

Міжнародні макросоціальні показники як аналітичні інструменти в соціології

В статті розглянуто ряд ініційованих міжнародними інституціями проєктів, які є джерелом системи показників для порівняльного вивчення суспільств(-а) на глобальному рівні, а також розширюють спектр методичних і аналітичних інструментів у соціології. Автори виокремлюють наступні обмеження при використанні даних міжнародних порівняльних проектів – це порівнюваність, інтерпретація та рейтингування. Обмеження спричинені соціально-культурними відмінностями країн, відсутністю єдиної системи фіксації статистичних даних у державах, різною кількістю країн-учасниць проєктів, варіативністю джерел первинних даних для обчислення індексів. До означених причин варто додати і політичну ситуацію в державі.
 Аналіз даних на рівні окремої країни потребує розгляду даних за усі роки її участі у проєкті та обов’язкове звернення до змістового наповнення індексу та його складових.
 Цінність дослідження полягає також у акумуляції електронних посилань про міжнародні проекти в межах одного джерела, що спрощує пошук необхідної інформації. Проте кількість і тематична варіативність міжнародних макросоціальних показників є значно більшою, тож перспективи цього дослідження полягають у розширенні їх кола, детального аналізу окремих інституцій і/або проєктів, які їх конструюють, тематичних наукових дослідженнях з використаннях макросоціальних показників.

THE PLACE OF ECONOMIC FREEDOM IN THE ECONOMIC POLICY OF THE COUNTRY

A market economy is based on economic freedom, which is revealed in freedom of choice. Choice is the main precondition for competition, and competition is the main driving force of economic development. Economic freedom contributes to the development of the economy of country and the well-being of the population the country depends on it. The International Heritage Foundation has been conducting annual surveys since 1995 on the fulfillment of these conditions in 180 countries around the world, including Georgia. The index of economic freedom in Georgia changes every year. A country is considered economically free if it does not restrict individual choice, voluntary exchange, freedom of competition. A necessary condition is the protection of private property. In an economically free society, every person has the full right, at his own discretion and in the conditions of free choice, to achieve his own goals, the state does not interfere in its activities and choices. It should be noted that economic freedom does not mean economic independence. At the present stage of society's development, the economic activities of any economic entity are so intertwined, so dynamic and in-depth, that the notion of economic independence sounds more an anachronistic than a 21st-century achievement.This applies to relations between countries, as well as relations between individuals and legal entities. Economic freedom means, above all, freedom of choice. Index of Economic Freedom (Economic Freedom of the World) is a measure of economic freedom compiled by the Heritage Foundation, a leading center for American policy research and ,,The Wall Street Journal“ . This index has been established since 1995.The world rating of "economic freedom" has a great importance in terms of further attracting investment in the country. The Index of Economic Freedom is based on ten criteria. These are: freedom of business, freedom of trade, fiscal freedom, government costs, monetary freedom, freedom of investment, financial freedom, property rights, freedom from corruption, freedom of labor. The information on the results of survey of the Heritage Foundation "Economic Freedom Index" 2020 is posted on the official website of the Ministry of Economy and Sustainable Development of Georgia, according to the survey 2020 of the "Heritage Foundation" Index of Economic Freedom " rating score of Georgia reached a historical maximum - 77.1 points, it was promoted by 4 positions in the world ranking and took the 12th position. Compared to the previous year, Georgia was promoted by 2 positions in the European region - with this result Georgia is in the 6th place among 45 countries in the European region with the status of "mostly free". Total score ofGeorgia exceeds both the regional (69.8 points) and the world average point (61.6 points). In our view, property rights are crucial in this large system of valuation. In terms of private ownership, the benefit or loss is the property of the owner, which gives him an incentive to use the resource efficiently. When a resource is transferred to collective ownership, the responsibilities are dispelled, and the different motives of the owners ultimately make the preservation and reasonable use of that resource less possible. An even worse result is achieved if the asset becomes state-owned, because then the liability for profit and loss is not dispersed but divided among different groups.There are known cases in the Czech Republic, Poland and Hungary, where after the end of socialism, the profitability of privately owned companies increased by an average of 77% in just a few years. There are many such stories in the former socialist countries, although privatization is a permanent process in developed countries as well, and the value of privately owned assets around the world has, in fact, been rising every year since the 1980s.