Economic Freedom of the World, 2002

Abstract

The Economic Freedom of the World (EFW) annual reports have presented an economic freedom index for a large set of nations around the world. This index is designed to measure the degree to which a nation’s policies and institutions protect its citizens’ economic freedom. In this article, we explain the basic methodology employed in constructing the index and summarize the study’s findings. Many factors influence the degree of economic freedom. Although no single statistic can capture all of them and their interrelations fully, the index presented here captures most of the important elements and provides a reasonably good measure of cross-country differences in economic freedom. The identification of these differences has been useful for researchers interested in the relationship between economic freedom and other economic variables such as income, economic growth, income equity, and environmental quality. To date, dozens of scholarly articles and hundreds of policy and journalistic reports have made use of the index.