Economic Freedom Index Research Articles

Economic Freedom: The Top, the Bottom, and the Reality. I. 1997-2007.

We recall the historically admitted prerequisites of Economic Freedom (EF). We have examined 908 data points for the Economic Freedom of the World (EFW) index and 1884 points for the Index of Economic Freedom (IEF); the studied periods are 2000–2006 and 1997–2007, respectively, thereby following the Berlin wall collapse, and including 11 September 2001. After discussing EFW index and IEF, in order to compare the indices, one needs to study their overlap in time and space. That leaves 138 countries to be examined over a period extending from 2000 to 2006, thus 2 sets of 862 data points. The data analysis pertains to the rank-size law technique. It is examined whether the distributions obey an exponential or a power law. A correlation with the country’s Gross Domestic Product (GDP), an admittedly major determinant of EF, follows, distinguishing regional aspects, i.e., defining 6 continents. Semi-log plots show that the EFW-rank relationship is exponential for countries of high rank (≥20); overall the log–log plots point to a behaviour close to a power law. In contrast, for the IEF, the overall ranking has an exponential behaviour; but the log–log plots point to the existence of a transitional point between two different power laws, i.e., near rank 10. Moreover, log–log plots of the EFW index relationship to country GDP are characterised by a power law, with a rather stable exponent () as a function of time. In contrast, log–log plots of the IEF relationship with the country’s gross domestic product point to a downward evolutive power law as a function of time. Markedly the two studied indices provide different aspects of EF.

EUROPEAN INTEGRATION: ADVANTAGES AND THREATS TO UKRAINE’S FOREIGN TRADE

Background. In terms of unfavorable external conditions and a significant deterioration of the socio-economic situation, the Ukrainian market has stagnated. Russia’s actions, including its unilateral suspension of the Free Trade Agreement, have led to a reduction in Ukraine's bilateral foreign trade operations. The processes of globalization and integration issue new challenges to the economy of any country, in particular, the questions of evaluation and stimulation of foreign trade of enterprises emerge in the conditions of constant transformation. Therefore, the aim of this study is to identifytrends and features of Ukraine’s foreign trade in the context of globalization and integration. Materials and methods. The article is based on a synthesis of research results of domestic and foreign scientists to determine the main influencing factors of cooperation with the EU on the state of development of Ukraine’s foreign trade. Research on this issue was conducted using the methods of theoretical generalization, analysis and synthesis. Results. Ukraine’s position in world trade is determined by the main factors: the dynamics of GDP, rating and index of economic freedom. The peculiarities of Ukraine's foreign trade over the last decade have been studied, the main partner countries; the main challenges that arise in our foreign trade as a result of European integration processes have been identified. It is proved that in the analysis of GDP it is expedient to use the indicator of GDP calculated on purchasing power parity. It is established that in the conditions of the world crisis, the war in the east caused the greatest damage to the economy of Ukraine. It was clarified that Ukraine needs to expand the geography of foreign trade relations, at the same time there is a significant unrealized potential for the development of bilateral relations with EU countries. Conclusion. Ukraine must follow the chosen course of European integration, but at the same must also develop other partnerships with countries on other continents. Unfortunately, Ukraine exports more raw materials and goods with low added value. Therefore, there is a need: to change the content of exports, to introduce tax and customs instruments to support exports, to amend the Association Agreement in terms of international trade. The structure of foreign trade does not stimulate Ukraine's economy to innovative development, so there is an urgent need for domestic policy reforms and changes in external priorities.

The Development and Transformation of the Bank Card Market as an Imperative for Digitalization: the Case of Central and Eastern European Countries

The purpose of this study is to determine the development trends of the major determinants of the bank card market in eight countries of Central and Eastern Europe in the period from 2010 to 2019. Continuing a study carried out in 2018, further comparative analysis of the “Bank Cards Market Index” proposed earlier and based on a system of interrelated indicators of bank payment cards, ATMs and POS‑terminals, was carried out. We provide an overview of the rankings of Ukraine, Belarus, Moldova, Russia, Romania, Poland, Hungary, Slovakia using international ranking systems such as “The Legatum Prosperity Index,” “Doing Business,” “The Index of Economic Freedom,” and the “Вank Cards Market Index.” Further studies of three international ranking systems, as well as the “Bank Cards Market Index,” again confirmed the similarity of the development models of the bank card market in Poland and Ukraine. To study the impact of the digitalization of economics and Covid–19 on the bank card market, a deeper analysis of two cases (Poland and Ukraine, as two similar bank card markets) was carried out using the “Digital Evolution Index.” In the course of the research, it was concluded that the “Вank Cards Market Index” can be successfully used for further research of the banking sector of different countries. Also, the growth trend of cashless payments in the bank card market and the possible transformation of the market under the influence of Covid–19, and the global digitalization of economics were noticed. Taking into account the above trend, further studies of the system of interrelated indicators of bank payment cards, ATMs, and POS terminals should be carried out using the “Digital Evolution Index” or other international indexes that characterize the level of digitalization of the economy in the researched countries.

Ефективність управління публічними фінансами в нових економічних умовах

Розглянуто особливості управління публічними фінансами в нових економічних умовах. Проаналізовано категорію ефективності у сфері управління публічними фінансами. Розглянуто проблеми, які пов’язані із ефективним розподілом та перерозподілом державних коштів в Україні. Обґрунтовано напрями підвищення ефективності управління публічними фінансами в нових економічних умовах.

Investigating the effect of Dynamics Employment and Institutional factors with a focus on Economic Freedom and Ease Doing of Business on GDP per capita in Iran

Purpose: Since employment and growth is an important and key issue in the economy, having an efficient environment is very important for proper growth. Therefore, in order to improve the current situation and achieve proper development, it is necessary to study the effect of Dynamics Employment and institutional factors in order to identify the effective channels to improve the current situation, effective factors and appropriate growth. Methodology: Therefore, the main purpose of this study is to investigate the effect of Dynamics Employment on GDP per capita in Iran during the period 2004-2021 using the generalized time series torque method. Findings: The results show that Dynamics Employment have a significant effect on Iran's per capita GDP; Thus, the dependency rate of the elderly, the dependency rate of children and the negative impact and the participation rate, labor productivity rate, employment rate have a positive impact on GDP per capita. The results also show that institutional factors have a significant impact on GDP per capita growth and improving the indicators of economic freedom and ease of doing business, which are the most important institutional factors, accelerate growth and development. Originality/Value: This paper investigated the effect of Dynamics Employment and institutional factors with a focus on economic freedom and Ease Doing of Business on GDP per capita in Iran.

Free market capitalism and societal inequities: Assessing the effects of economic freedom on income inequality and the equity of access to opportunity, 1990–2017

Some blame free-market capitalism for increasing income inequality, arguing that richer classes could block access to others for maintaining their privileges. By manipulating the degree of political rights and resources available to others, the rich could reduce opportunities for others. Others argue that growth-promoting free markets raise all incomes, increasing aggregate welfare. We argue that governments more dependent on free markets are likely to focus on increasing access to human capital, thereby narrowing the gap between the rich and poor by increasing opportunities, even if income inequality rises with high growth. We assess the issue by examining the effects of an Index of Economic Freedom on income inequality measured by the standardized GINI and measures of the equity of access to quality schooling, health, and justice covering 128 developing countries during the 1990–2017 period. Our results show that, even if economic freedom is associated with higher income inequality, it also associates robustly with access to opportunity. Our results are robust to alternative models, sample size, and testing methods, including instrumental variables analyzes addressing potential endogeneity bias. Our results, taken together, do not suggest that growth-promoting economic freedoms hamper future progress by raising inequalities—on the contrary, economic freedoms promote equity of access to opportunities—findings inconsistent with the view that governments under free-market conditions are easily captured by the wealthy, who then block equitable access to public goods.

The Impact of Institutional Environment on Risk Assessment

The purpose of this research is to investigate the relationship between the institutional environment of the studied countries and the Coface Country Risk Assessment. To meet this object, we used quantitative methods in the form of descriptive and regression analysis. The result was an evaluation of the actual Coface Country Risk Assessment and its value prediction for chosen countries. The authors quantified the impact of the institutional environment using The Heritage Index of Economic Freedom subindexes on the risk assessment indicator of the major private insurance company Coface, which is not so often used in the scientific sphere and is regularly updated. The results suggest a positive correlation between the Coface Country Risk Assessment and Government Integrity, Fiscal Health, Financial Freedom and Property Rights. Although Tax Burden is a statistically significant factor, its parameter was detected with an unexpected sign. For this reason, authors abstracted from it. Subindexes Government Spending, Business Freedom, Monetary Freedom, Trade Freedom, and Investment Freedom were statistically insignificant. Control variable Public Debt as a share of gross domestic product was insignificant as well. Implications for Central European audience: The article applies the Coface Country Risk Assessment, which has so far been rarely used in the scientific literature. We present the current and predicted values of the Central European Countries, but also the countries interesting from their point of view due to trade and investment opportunities. Many countries, including those in Central Europe, show differences between actual and predicted values.

The sum of its parts: Examining the institutional effects on entrepreneurial nodes in extensive innovation ecosystems

Innovation ecosystems are intricate networks that provide opportunities to access resources, capabilities, and cooperating firms for value-creating knowledge transfer. While the literature has noted the complex nature of diverse innovation ecosystem actors, fewer studies have refined how macro-institutional pressures impact behavioral interactions among diverse entities. The innovation ecosystem research has yet to theoretically refine how micro-level complex components (entities) navigate environments, coalescence, and overcome barriers within varying institutional conditions. Ultimately, each entity behaves and is governed by diverse motivational drivers. Yet, the divergent impacts this has on key behaviors have not been covered by broader-scale empirical studies. Therefore, this study focused on the institutional mechanisms that influence the crucial role of entrepreneurial networking activities in ecosystems. Using a global sample, the study employed a multi-level logistic regression model and data developed from the Global Entrepreneurship Monitor, World Development Indicators, Index of Economic Freedom, and the World Governance Indicators to reveal certain forms of institutional settings that influence collaborative behavior in the ecosystem and entrepreneurial networks' emergence. It emphasizes the need for managers and policymakers to recognize these effects and enact strategies that promote value-creating entrepreneurial network behavior on the individual level to benefit the holistic ecosystem performance.

Determinants of Economic Complexity in Transitional Economies

Which country is more developed? Which country's foreign trade policies are more rational? In a globalized world, which country has higher added value and competitiveness in its exports? Questions like this are not easy to answer. Because there are many criteria for measuring the development of the economy and foreign trade of countries. In this context, an important index called The Economic Complexity Index (ECI) was created by Hidalgo and Hausmann to measure and compare the development of the country's economies and foreign trade. For this purpose, we test whether economic growth, foreign direct investment, Human Development Index, Economic Freedom Index cause economic complexity, vice versa in this study. We analyze annual data for the period 1996-2017 for 22 countries called Transitional Economies using the panel causality method. Considering all of Transitional Economies, according to the results of the Bootstrap Granger causality test, we were not able to determine a Granger causality relationship between economic growth, foreign direct investment, Human Development Index, Economic Freedom Index and Economic Complexity Index. However, when we consider country-specific variables defined as Transitional Economies, we identify both one-way and two-way Granger causal relationships in some countries between economic growth, foreign direct investment, Human Development Index and Economic Freedom Index, and Economic Complexity Index. Therefore, some Transitional Economies need to increase their level of economic complexity to get a larger share from global added value and increase their competitiveness. In this context, economic complexity needs to be taken more seriously by both scientists and policymakers, and decision-makers.

The certainty–offending relationship as a function of a nation's free market cultural ethos

The current study sought to integrate aspects of classic strain and institutional anomie theories with concepts from deterrence and rational choice theories for application in a large sample of European respondents. Participants were 52,458 individuals (55% female, average age = 48 years) from the fifth round of the 27-country European Social Survey. Each participant rated their involvement in three relatively minor offenses (false insurance claims, buying stolen property, and traffic offenses) over the past five years along with their perceived certainty of getting caught and punished should they commit one or more of these prohibited acts. Each country's total 2010 Index of Economic Freedom score was also included in the study as a level 2 variable in a two-level multilevel modeling analysis. Consistent with predictions, participants from countries with higher Index of Economic Freedom scores displayed a significantly stronger connection between certainty of punishment and involvement in minor offending than participants from lower Index of Economic Freedom countries. An additional individual-level variable, the marketized mentality, was also included in the analysis and while it correlated with minor offending, it failed to interact with the Index of Economic Freedom or alter free market cultural ethos moderation of the certainty-offending relationship. These findings suggest that individuals living in a country with a strong free market cultural ethos are more apt to incorporate rational choice principles like certainty into their crime-related decisions than individuals residing in a country with a weaker free market cultural ethos.

The Impact of Quality of Governance, Renewable Energy and Foreign Direct Investment on Sustainable Development in Cee Countries

Recent debates on the Environmental Kuznets Curve (EKC) in the context of the European Green Deal highlights that pollution could be controlled using channels other than economic development. The role of renewable energy consumption in reducing pollution should be correlated with quality of governance, which could support initiatives for a cleaner environment. This study considers the renewable Kuznets curve for 10 Central and Eastern European countries in the period 2006–2019, using economic indicators (index of economic freedom, foreign direct investment, domestic credit to private sector and labour productivity) as control variables and indicators reflecting the quality of governance (Worldwide Governance Indicators and Google Trend indexes associated to key-word corruption in each language). The research is based on two types of panel data models: panel dynamic OLS model (PDOLS) and panel autoregressive distributed lag models based on pooled mean group (PMG) estimator. The results indicate that government effectiveness reduces pollution in both the short-run and long-run, while control of corruption and rule of law supports environmental protection in the long-run. Google searches for corruption as a proxy for quality of governance indicate that tGHG emissions have immediate and practical implications in nowcasting pollution.

On the foreign direct investment–economic growth relationship in Africa: does economic freedom mediate this relationship?

PurposeIn this study, the authors examine how economic freedom mediates the impact of foreign direct investment (FDI) on economic growth in Africa.Design/methodology/approachBy using data from 41 countries over the period 2000–2017, the authors invoke Seo and Shin's (2016) sample splitting approach while relying on the recently developed Seo et al.'s (2019) computationally robust bootstrap algorithm to achieve the purpose of this study.FindingsThe authors find evidence of economic freedom threshold that bifurcates the link between FDI and economic growth in Africa. More precisely, FDI does not improve overall economic growth for African countries whose economic freedom index is below the estimated threshold while significantly spurring growth for African countries with economic freedom above this threshold.Practical implicationsAfrican countries need to strive towards improving their level of economic freedom through the strengthening of rule of law, reducing government size, promoting regulatory efficiency and further opening of the goods and capital markets.Originality/valueThe association between FDI and economic growth has been well documented. While the positive theoretical postulations are almost conclusive, empirical literature on the precise effect of FDI remains contentious and far from being settled. What is missing in the existing literature in Africa is whether countries' level of economic freedom mediates how FDI explains the variations in economic growth across African countries. The authors fill this research gap.

ОЦІНКА СОЦІАЛЬНО-ЕКОНОМІЧНИХ РЕЗУЛЬТАТІВ УПРАВЛІННЯ ЕКОНОМІКОЮ УКРАЇНИ

The paper was focused on researching the evolution and the reasons for the crisis in the economy of Ukraine for the period of independence. It was determined that the changes in the social and economic nature of the country’s development were followed by discrepancy in power and resources relations as well as in opposition between political forces and business elite. We analyzed the dynamics of changes in the main macroeconomic indicators in the development of the Ukrainian economy. The results showed that large-scale changes had different effects on the development of the national economy, which was characterized by long periods of crisis and short periods of extensive growth. Three main crises in the economical development have been characterized and the reasons for this were identified. We performed an assessment of the multiple indicators dynamics that characterise the outcomes of the economical governance. Specifically, the level of GDP per capita using purchasing power parity, the dynamics of export, import and balance of foreign trade as well as the dynamics of changes in the index of capital investment and the index of economic freedom. It has been established that the presence of effective structural changes in the economy of the country has caused the accumulation of internal and external economic imbalances. The results of the analysis of the rating assessment of the economy of Ukraine by international organizations showed consistently low positions of the country. We concluded that ineffective economic development became one of the main reasons for the deterioration of the social development of the country. Negative indicators of such development were a sharp decline in population, life expectancy, low wages and social security compared to other European countries.

CALCULATION OF SUSTAINABLE DEVELOPMENT INDEX IN THE EU AND UKRAINE

It is proposed using certain indicators to assess the sustainable development of the EU countries and Ukraine: for the economic measuring - the global competitiveness index, the global innovation index and the index of economic freedom; for the social measuring - the social progress index, the human development index, quality of life index; for the environmental measuring - environmental performance index. The analysis of each selected indices of the EU countries and Ukraine is carried out. The methodology for calculating the ratio of the economic, social and environmental components of sustainable development for each EU country and Ukraine is presented. Attention is focused on the significant regional diversification of sustainable development and its components in the EU countries and Ukraine; the highest, middle and lowest levels of sustainable development of counties are identified. Impact: the methodology for the study of sustainable development, proposed by the authors on the example of the EU countries and Ukraine, is based on objective international ratings that have a transparent calculation methodology. These international ratings are constantly updated and cover most of the countries of the world. Therefore, the proposed methodology makes it possible to identify countries with the highest level of economic, social and environmental development; calculate the index of sustainable development of any country in the world.

A Comparative Analysis of the Power of Selected European Countries. The Economic Determinants

The ever-increasing need for in-depth analysis and quantification of the national power, in particular ‘hard’ and ‘soft’ power-generating factors as well as difficulties in identifying a comprehensive and effective method for scientific determination of the national power, have given rise to research in the indicated scientific issues within this article. The presented considerations aim to define the assumptions for a descriptive sub-model that would enable a comparison of Poland’s power in the economic sphere (which is a component of the non-military sphere) with the power of selected European countries. The research hypothesis is that, among the variety of descriptive variables in the economic sphere of the national power, there is a subset of mutually independent variables, at the same time strongly correlated with the national power, which make it possible to define assumptions for the sub-model of the national power. The steps of the research procedure were carried out using the method of system analysis (multi-criteria comparative analysis) and statistical analysis. The research activities undertaken have shown that the factors that are strongly correlated with the national power in the economic area of the European countries adopted for the analysis are: dynamics of industrial production, private sector credit flows and economic freedom index. The comparative analysis carried out demonstrates that the greatest increase in the economic power in the analysed period took place in Germany (0.68). Slightly smaller growth was recorded in the Czech Republic (0.62) and Poland (0.60), while the lowest value of increase was in Romania (0.23). The conducted qualitative comparative analysis of the economic power of selected European countries allowed to conclude that the independent variables identified are crucial for the formation of the economic power of the analysed countries. At the same time, a fairly strong position of the Czech Republic and Poland in relation to the economic power of Germany was found. The performed quantification of the economic power of the European countries provides a basis for the correct determination of changes in the power distribution of political units, assessment of the power and resources held by the state.

The effect of sanctions on economic freedom

AbstractWhen states are targeted with sanctions, they may respond with alterations of their domestic economies meant to counter any negative effects of sanctions. In this article, we argue that these alterations tend to lead to increased state command of the economy and reduced economic freedom, as sanctions create opportunities and incentives that encourage target states and firms within them to pursue increased state control of the economy. These declines in economic freedom may come about through a number of causal mechanisms, several of which will be elaborated upon in this article. We use large‐N empirical analysis of all aspects of the Fraser Institute's Index of Economic Freedom and find that sanctions associate with reductions in most components of economic freedom.

The Impact of Economic Freedoms on Tourism Competitiveness: Empirical Evidence from Latin America Countries

This study aims to investigate the relationship between economic freedoms and tourism competitiveness with respect to Latin American countries. Index of Economic Freedom published by Heritage Foundation was used as the indicator of economic freedoms. Travel and Tourism Competitiveness Index published by World Economic Forum was utilized as the indicator of tourism competitiveness. In addition to government spending, which is a sub-index of the index of economic freedom, Corruption Perception Index, GDP per capita, foreign direct investments, and trade openness ratio were included in the study as control variables. Panel data analysis was carried out using data of the period 2007-2019 belonging to 18 Latin American countries. It was found out at the end of the analysis that as economic freedoms increased in Latin American countries; tourism competitiveness also increased in these countries.

Impact of Labor Mobility on Economic Growth: A Comparative Study between Egypt and Vietnam

This paper will discuss how labor mobility accelerates economic growth based on a comparative study between Egypt and Vietnam during the period of 2009 to 2019 from the Index of Economic Freedom. This paper is based on analyzing the four main pillars of economic freedom. Using the Heritage Foundation to assess the labor mobility in both Egypt and Vietnam, both countries were considered as mostly unfree with an overall score of 52.5% with a world rank of 144 and an overall score of 55.3% with a world rank of 128, respectively. Lastly, this paper will investigate, propose, and recommend ways for Vietnam and Egypt to accelerate their growths via restructuring the labor market during the period of 2008 till 2018.

Exploring the influence of economic freedom index on fishing grounds footprint in environmental Kuznets curve framework through spatial econometrics technique: evidence from Asia-Pacific countries.

Environmental challenges are as vast as the universe, allowing for numerous studies on their various dimensions. Using 17 data sets from Asia-Pacific countries between 2000 and 2017, this study attempted to investigate the economic factors influencing the ecological footprint of the fishing sector. The primary contribution of this study is to examine the effects of nine economic freedom indicators, as well as other control variables, on the status of fishery resources due to environmental pressure. The findings confirm the environmental Kuznets curve (EKC) hypothesis in the fishing grounds footprint, indicating that GDP per capita growth has a positive and significant effect, even though its squared form coefficient is negative. Other control variables, including natural resource rents, urbanization, and energy intensity, do not significantly affect the fishing footprint. The different components of economic freedom show different effects, while their cumulative effects in the form of the total economic freedom index positively affect the footprint of fishing and lead to increased extraction from fishing resources. The results show that the government integrity, tax burden, business freedom, and monetary freedom indices increase the fishing footprint. In contrast, indices of trade freedom and investment freedom, by highlighting the adverse effects of fishing on the environment, help countries reduce pressure on their aquatic resources. The findings of this study highlight the importance of examining how various dimensions of economic freedom affect the ability to manage fishery resources effectively.

Do economic freedom, business experience, and firm size affect internationalization speed? Evidence from small firms in Chile, Colombia, and Peru

This paper focuses on SMEs from the Latin American region and aims to build on existing literature on the emergence of the institution-based view in combination with the resource-based view. We contribute to existing literature by extending the application of the aforementioned theories to firms in three under-researched countries in this region. Specifically, we contribute to the extant literature by providing empirical insights on how home country–specific resources and firm-specific resources can affect the internationalization speed of SMEs in Latin American region. In order to achieve our objectives, we empirically examine the role of economic freedom (EF), prior business/international experience, and firm size on speed of internationalization. We use a dataset of Latin American SMEs, employing Poisson and negative binomial (NB) regression techniques. Our data cover three main Latin American Pacific Rim economies—Chile, Colombia, and Peru—with similar economic specializations, geographical borders, and economic growth dynamics. We find that (1) some parts of Economic Freedom Index (EFI) accelerate the speed of internationalization, whereas other areas slow it down or have no effect. Specifically, the closer to full EF the home country is in terms of regulations and government, the shorter the time to internationalize. (2) More experienced management teams are more likely to translate their knowledge into faster international market entry, but this pays off only for larger sized SMEs in contrast to smaller ones due to complementarities between managerial resources and physical, financial, and organizational resources. (3) Finally, industry, firm location, and country destination can only weakly explain the speed of internationalization. The findings add to the literature on SME internationalization in emerging markets and point towards potential policies to stimulate growth by SMEs in these markets.