What is Index of Economic Freedom(IEF)經(jīng)濟(jì)自由度指數(shù)是什么（IEF）

1、INDEX OF ECONOMIC FREEDOM(IEF) VS. UNEMPLOYMENT RATE06010938 TAM Shui Lik06016295 TSANG Ho Fung06017819 YAU Suet Man06018548 CHAN Kit Ying06019641 SUEN Lok ManWHAT IS INDEX OF ECONOMIC FREEDOM (IEF)?a series of 10 economic measurements created by the Wall Street Journal and The Heritage Foundation t

2、o measure the degree of economic freedom in the worlds nationstheoretical analysis of the factors that most influence the institutional setting of economic growth.to develop a systematic, empirical measurement of economic freedom in countries throughout the worldHISTORY OF THE IEFCreated by the Heri

3、tage Foundation and the Wall Street Journal in 1995based on economic theories like Adam Smiths The Wealth of Nationsexplaining that basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger societyINDEX OF ECONOMIC F

4、REEDOM (2008)The 2008 Index of Economic Freedom covers 162 countries across 10 specific freedoms. View scores and rankings for any country, along with detailed data and background analysis. METHODOLOGY: MEASURING THE 10 ECONOMIC FREEDOMSOverall economic freedom, defined by multiple rights and libert

5、ies, can be quantified as an index of less abstract components. The index we conceive uses 10 specific freedoms, some as composites of even further detailed and quantifiable components. WEIGHINGAll factors are weighted equallyEach factor is graded according to an unique scale The scale run from 0 to

6、 100Overall score base on the simple average of the 10 individual factor scores5 BROAD CATEGORIES OF ECONOMIC FREEDOMCategories FreeMostly freeModerately FreeMostly UnfreeRepressedAverage overall score 80-10070-79.960-69.950-50.90-49.910 BROAD FACTORS OF ECONOMIC FREEDOM Business Freedom Trade Freed

7、om Fiscal Freedom Government SizeMonetary Freedom Investment FreedomFinancial Freedom Property RightsFreedom from Corruption Labor Freedom 1. BUSINESS FREEDOMIt is a quantitative measure of the ability to start, operate, and close a business that represented the overall burden as well as the efficie

8、ncy of government regulations.The score is based on 10 components, all weighted equally, based on objective data from the World Banks Doing Business study. Each component is converted to a 100 percent scale using the above equation2.TRADE FREEDOM Trade restrictions can take the form of taxes on impo

9、rts and exports (known as tariffs), quotas or outright bans on trade, and regulatory barriers. The degree to which government hinders access to and the free flow of foreign commerce can have a direct bearing on the ability of individuals to pursue their economic goals. Methodology. The trade freedom

10、 score is based two inputs: 1.The trade-weighted average tariff rate 2. Non-tariff barriers (NTBs)3.FISCAL FREEDOMFiscal freedom is a quantitative measure of these burdens in which lower taxation translates as a higher level of fiscal freedom. The Index methodology includes the top marginal tax rate

11、s on individual and corporate income, as well as a measure of total tax revenue as a portion of gross domestic product (GDP). Methodology. Fiscal freedom is composed of three quantitative components in equal measure: 1.The top tax rate on individual income, 2.The top tax rate on corporate income 3.T

12、otal tax revenue as a percentage of GDP4.GOVERNMENT SIZEThe burden of excessive government is a central issue in economic freedom, both in terms of generating revenue and in terms of expenditure. The governments appetite for private resources affects both economic freedom and economic growth. Method

13、ology. Scoring of the freedom from government factor is based on two components: 1.Government expenditures as a percentage of GDP 2.Revenues generated by state-owned enterprises (SOEs) and property as a percentage of total government revenue. It is to market economics what free speech to democracy.

14、Free people need a steady and reliable currency as a medium of exchange and store of valueMethodology The score for the monetary freedom factor is based on two components: 1.The weighted average inflation rate for the most recent three years 2.Price controls 5.MONETARY FREEDOM6. INVESTMENT FREEDOMRe

15、strictions on foreign investment limit the inflow of capital and thus limit economic freedom. By contrast, little or no restriction of foreign investment enhances economic freedom because foreign in-vestment provides funds for economic expansion Methodology. This factor scrutinizes each countrys pol

16、icies toward foreign investment, as well as its policies toward capital flows internally, in order to determine its overall investment climate. Rank from 100% (the most) without trade restriction to 0%(the least) with heavy government intervention7. FINANCIAL FREEDOMHeavy bank regulation reduces opp

17、ortunities and restricts economic freedom; therefore, the more a government restricts its banking sector, the lower its economic freedom score will be. Methodology The financial freedom factor measures the relative openness of each countrys banking and financial system. description of the countrys f

18、inancial climate and assign it an overall score between 0%(Negligible government influence) and 100 %(Repressive) 8. PROPERTY RIGHTSSecure property rights give citizens the confidence to undertake commercial activities, save their income, and make long-term plans because they know that their income

19、and savings are safe from expropriation, so as to have a fully functioning free-market economy. Methodologythe degree to which a countrys laws protect private property rights assesses the likelihood that private property will be expropriated within the judiciary100%Private property is guaranteed by

20、the government. 0%Private property is outlawed, and all property belongs to the state. 9. FREEDOM FROM CORRUPTION Corruption infects all parts of an economy unless the market is allowed to develop transparency and effective policing. a higher level of corruption equates to a greater corrosion of eco

21、nomic freedomMethodology. This factor relies on Transparency Internationals Corruption Perceptions Index (CPI), to determine the freedom from corruption scores of countries that are also listed in the Index of Economic Freedom. The CPI is based on a 10-point scale:10 indicates very little corruption

22、 & 1 indicates a very corrupt government.10. LABOR FREEDOM Labor policy has been a key variable in the IEFMethodology. A composite measure of the ability of workers and businesses to interact without restriction by the stateThe following components are weighted equally: Minimum wage, Rigidity of hou

23、rs, Difficulty of firing redundant employeesCost of firing redundant employees. THE CHANGE OF METHODOLOGY The Index methodology is consistent with the revisions made in 2007,measuring the same 10 economic freedoms in each economy and using exactly the same underlying dataRescaling the business freed

24、om scores from19952005 in order to make them comparableas a time series with the new methodology inplace for 20062008;Revising last years business freedom andlabor freedom scores to reflect revisions to theWorld Bank Doing Business data;Enhancing the detail and process used tomeasure non-tariff barr

25、iers (NTBs) and extending that approach back to 1995;Updating the coefficients used in the equationsfor two factorsgovernment size andfiscal freedomto align them with each other and with the other eight freedoms; and Adding new data from Transparency Internationalfor earlier years back to 1997.RANKI

26、NG IN 2008Top 10 countries in 2008UNEMPLOYMENTWhat is Unemployment :people aged 16 and over are unemployed if they are: out of work, want a job, have actively sought work in the last four weeks and are available to start work in the next two weeksout of work, have found a job and are waiting to star

27、t it in the next two weeks. This definition is used by EU and OECD Source: The Office for National Statistics (ONS)Types of Unemployment :1.Frictional unemployment:those searching for jobs or waiting to take jobs soon; indicates that there is mobility as people change or seek jobs. 2. Cyclical unemp

28、loyment : recession phase of the business cycle3. Structural unemployment : changes in the structure of demand for laborGlass blowers were replaced by bottle-making machines.Oil-field workers were displaced when oil demand fell in 1980s.Airline mergers displaced many airline workers in 1980s. The un

29、employment rate :Determined by dividing the number of unemployed workers by the total civilian labor force.UNEMPLOYMENT VS. ECONOMIC FREEDOMUnemployment rate of the top 10 IEF Countries or Regions 2008 RELATIONSHIP BETWEEN IEF AND UNEMPLOYMENTNegatively relatedHigher IEF Lower unemployment rate Lowe

30、r IEF Higher unemployment rateRELATIONSHIP BETWEEN UNEMPLOYMENT RATE AND IEFA.) Size of Government and Fiscal Freedom :1) Large government sector crowds out the private sector reduces international competitiveness unemployment rate (women and young people) RELATIONSHIP BETWEEN UNEMPLOYMENT RATE AND

31、IEF2)Large proportion of transfer payment high taxation reduce the profitability of private investment discourage investment more unemployment welfare lazier workers unemployment rate Bigger size of govt and lower Fiscal Freedom lower IEF higher unemployment rateRELATIONSHIP BETWEEN UNEMPLOYMENT RAT

32、E AND IEFB.) Property rights Good property rights reduce uncertainty encourage investment strong incentive to be employed income they earn is legally secured unemployment rate Better Property rights higher IEF lower Unemployment rate RELATIONSHIP BETWEEN UNEMPLOYMENT RATE AND IEFC.) Business ,Moneta

33、ry, Investment, Financial and Labor Freedom Higher the freedom higher the IEF More the investment lower unemployment rate RELATIONSHIP BETWEEN UNEMPLOYMENT RATE AND IEFD.) Trade Freedom High degree of freedom to trade well development of export sector well development of domestic production low unem

34、ployment rateHigher trade freedom higher IEF lower Unemployment rateEXAMPLES - ARGENTINAOverall Rank Year Overall scoreUnemployment rate108 2007 55.11 8.9(Est.)109 2006 55.02 10.18112 2005 54.57 11.58120 2004 52.85 13.63EXAMPLES - TURKEYOverall Rank Year Overall Score Unemployment rate74 2008 60.76

35、9.7(Est.)87 2007 58.24 9.990 2006 57.8 10.2132 2005 51.56 10.3Exceptional case: Under the central planning system, there is no unemployment EVALUATION OF THE INDEXCriticismContributionCRITICISMEconomic Freedom of the World has been used in most of the academic researchReasons: Index of Economic Free

36、dom only goes back to 1995 it uses more subjective variablesQuestioned about its methodology1. Qatar: questioned the rating of their countrys economic freedom in paring its middling rating with the high rating they had received from other indicators such as Transparency International and Moodys.the methodology had changed twice in the last two years, rendering its report “unreliable”Reference: /main.php?id=16985&t=1&c=33&cg=42. China:Not only is a higher level of economic freedom clearly associated with a higher level of per capita gross domestic product (G