DS 2500
A common problem for policymakers and government officials is determining the best course of action to take to improve the material well-being of their citizens. To simplify some macroeconomic theory, there's a dilemma for many decision makers. Do you intervene in the economy and risk slowing growth, or leave the problem alone and risk it never being solved? There are tons of unknown effects of any change in policy, so decision makers must have an idea of the baseline before any intervention. The intervention, and restriction of economic freedom, must produce better outcomes than there otherwise would be. Analyzing how reductions in economic freedom, through culture, institutions, or other factors affect economic growth and prosperity, will be important in recommending the best solutions. A better understanding of the relationship between economic freedom and growth will help leaders make the best decisions possible with the information possible, guaranteeing optimal outcomes for the greatest number of people.
https://fee.org/articles/economic-freedom-and-economic-growth/
Gwartney, J. D., Lawson, R. A., & Holcombe, R. G. (1999). Economic Freedom and the Environment for Economic Growth. Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift Für Die Gesamte Staatswissenschaft, 155(4), 643–663. http://www.jstor.org/stable/40752161
import pandas as pd
df_econ = pd.read_csv('economic_freedom_index2019_data.csv')
df_econ.head()
| CountryID | Country Name | WEBNAME | Region | World Rank | Region Rank | 2019 Score | Property Rights | Judical Effectiveness | Government Integrity | ... | Country | Population (Millions) | GDP (Billions, PPP) | GDP Growth Rate (%) | 5 Year GDP Growth Rate (%) | GDP per Capita (PPP) | Unemployment (%) | Inflation (%) | FDI Inflow (Millions) | Public Debt (% of GDP) | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 0 | 1 | Afghanistan | Afghanistan | Asia-Pacific | 152.0 | 39.0 | 51.5 | 19.6 | 29.6 | 25.2 | ... | Afghanistan | 35.5 | $69.60 | 2.5 | 2.9 | $1,958.00 | 8.8 | 5.0 | 53.9 | 7.3 |
| 1 | 2 | Albania | Albania | Europe | 52.0 | 27.0 | 66.5 | 54.8 | 30.6 | 40.4 | ... | Albania | 2.9 | $36.00 | 3.9 | 2.5 | $12,507.00 | 13.9 | 2.0 | 1,119.1 | 71.2 |
| 2 | 3 | Algeria | Algeria | Middle East and North Africa | 171.0 | 14.0 | 46.2 | 31.6 | 36.2 | 28.9 | ... | Algeria | 41.5 | $632.90 | 2.0 | 3.1 | $15,237.00 | 10.0 | 5.6 | 1,203.0 | 25.8 |
| 3 | 4 | Angola | Angola | Sub-Saharan Africa | 156.0 | 33.0 | 50.6 | 35.9 | 26.6 | 20.5 | ... | Angola | 28.2 | $190.30 | 0.7 | 2.9 | $6,753.00 | 8.2 | 31.7 | -2,254.5 | 65.3 |
| 4 | 5 | Argentina | Argentina | Americas | 148.0 | 26.0 | 52.2 | 47.8 | 44.5 | 33.5 | ... | Argentina | 44.1 | $920.20 | 2.9 | 0.7 | $20,876.00 | 8.7 | 25.7 | 11,857.0 | 52.6 |
5 rows × 34 columns
This data shows the economic growth statistics compared to their general measures of economic freedom. The data is consistent and thorough, categorically analyzing the aspects and sources of freedom, as well as providing in depth economic data on each country. Little is left to interpretation as almost all of the institutions and their contribution to economic freedom are analyzed. The methodology used to collect the data is transparent and the Economic Freedom Index is generally fairly well-respected. There are also over two decades of data collection, so trends over time can be observed if the need is there.
There are definitely some potential problems with this data. The scores are subjective. This is based on the analysis of a think tank that could have its own agenda, so there might be a narrative implicit within the data that the analysts put forward. Also, the relatively small number of countries, 186, might prove insufficient for thorough analysis. This could be remedied by using data from past years from the archive of this think tank, in order to analyze how changing policy and institutions affect these development scores.
| Data Item | Data Type | Description | ||
|---|---|---|---|---|
| CountryID | int | The index of the country | ||
| Country Name | string | The name of the country | ||
| WEBNAME | string | The formatted name of the country | ||
| Region | string | The region of the country | ||
| World Rank | int | The ranking of a country's economic freedom worldwide | ||
| Region Rank | int | The ranking of a country's economic freedom regionally | ||
| 2019 Score | float | A country's economic freedom score in 2019 | ||
| Property Rights | float | A 0-100 measure of how secure property rights are | ||
| Judicial Effectiveness | float | A 0-100 measure of how effective the judicial system is | ||
| Government Integrity | float | A 0-100 measure of how trustworthy and clean a government is | ||
| Tax Burden | float | A 0-100 measure of how light the taxes are, 100 meaning virtually no taxation | ||
| Gov't Spending | float | A 0-100 measure of how high government spending is, 100 meaning very low spending | ||
| Fiscal Health | float | A 0-100 measure of the size of the deficit, 100 meaning very low or surplus | ||
| Business Freedom | float | A 0-100 measure of how free businesses are in the economy | ||
| Labor Freedom | float | A 0-100 measure of the openness of the labor market | ||
| Monetary Freedom | float | A 0-100 measure of price stability and freedom of the price system | ||
| Tariff Freedom | float | A 0-100 measure of how free international trade is | ||
| Investment Freedom | float | A 0-100 measure of how free the investment market is | ||
| Financial Freedom | float | A 0-100 measure of how open the financial market and banking system is | ||
| Tariff Rate (%) | float | The average rate of tariffs on goods | ||
| Income Tax Rate (%) | float | The average tax on income | ||
| Corporate Tax Rate | float | The average rate of corporate taxation | ||
| Tax Burden % of GDP | float | What percentage of the GDP is equivalent to the tax burden | ||
| Gov't Expenditure % of GDP | float | How much of the GDP the government spends | ||
| Country | string | The name of the country | ||
| Population (Millions) | float | The population of the country in millions | ||
| GDP (Billions, PPP) | float | The purchasing power parity GDP of a country, in dollars | ||
| GDP Growth Rate (%) | float | How much has the GDP grown in the past year? | ||
| 5 Year GDP Growth Rate (%) | float | How much has the GDP grown in the past five years? | ||
| GDP per Capita (PPP) | float | The average income of each person | ||
| Unemployment (%) | float | The percentage of the population without a job | ||
| Inflation (%) | float | The rate at which prices increase | ||
| FDI Inflow (Millions) | float | The amount of foreign direct investment, in dollars | ||
| Public Debt (% of GDP | float | How much of the GDP the public debt is worth |
We will run a regression of economic freedom on economic growth, in order to determine if there is a strong linear relationship between economic freedom and economic growth. We will try and observe if countries with more economic freedom have higher rates of growth or GDP per capita, and vice versa.