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2nd Annual Index of Economic Efficiency of the world for 2011

2nd Annual Index of Economic Efficiency of the world for 2011

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Published by Taylor Cottam
The second annual ranking of countries in terms of economic freedom and rule of law.
The second annual ranking of countries in terms of economic freedom and rule of law.

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Published by: Taylor Cottam on Jan 10, 2011
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08/10/2013

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Updated Jan 15, 2011
 
www.economypolitics.com
 
EconomyPolitics 2nd annual index of Economic Efficiency of the World
By Taylor R. Cottam, CFA, FRM
 
 
Updated Jan 15, 2011
 
EconomyPolitics 2nd annual Index of Economic Efficiency of the World
 
The top ten countries in terms of economic efficiency for 2011:This is the first in a three part series where we identify the most attractive international investmentopportunities for the next ten years. We start out by looking at economic efficiency, i.e. thefundamental freedoms and legal framework, which facilitates successful investing.In doing country analysis for international investments, it is often a first step to look at sovereign bondratings from Moody's, Fitch or S&P. However, many smaller developing countries get very little if anyplay at the agencies. CDS spreads, another measure of investor risk only covers 80 countries. Our indexcovers 124 countries. To do so, we have looked at business and freedom indices which assign values tosovereign attributes to gauge risk and assess opportunity. These indices attempt to measure economicfreedom and a legal clarity.There are plenty of indices by many different sources, each one looks at important factors which couldinfluence returns and hurdle rates. But which index do you use? We have looked into four of such pollsand compiled an index of indices to measure efficiency.I have included information on five of such indices and compiled our own index of economicefficiency. The indices include:
 
Heritage Foundation: Index of Economic Freedom
 
Fraser Institute: Economic Freedom of the World
 
World Economic Forum: Global Competitiveness Report
 
World Bank: Doing Business
 
Euromoney Country Risk
 
 
Updated Jan 15, 2011
 
EconomyPolitics Methodology
To come up with an effective way of comparing the different indices, we first eliminated any countriesthat were not covered on all indices. We then scaled them, with the lowest country rank set to zero andthe highest country set to one. Then their relative positions are weighted by the corresponding score,not the ranking. The indexes are all given equal weighting.That score is the EconomyPolitics index of Economic Efficiency. The results can be seen below:
Rank Country Heritage Fraser WEF WorldBankEuro-moneyAverage1
Hong Kong 100.0% 100.0% 88.7% 97.0% 92.8%
0.9572
Singapore 96.3% 93.6% 94.7% 100.0% 90.8%
0.9513
Switzerland 88.5% 82.2% 100.0% 71.5% 96.4%
0.8774
Canada 86.8% 79.9% 88.7% 87.7% 94.1%
0.8745
New Zealand 89.1% 85.8% 75.4% 96.9% 88.9%
0.8726
Denmark 83.6% 75.2% 89.3% 91.7% 94.7%
0.8697
United States 82.4% 80.0% 93.1% 91.7% 86.9%
0.8688
Australia 89.3% 79.0% 82.1% 83.9% 91.7%
0.8529
United Kingdom 77.5% 77.4% 87.0% 94.3% 87.0%
0.84610
Finland 76.8% 72.7% 90.9% 82.3% 94.4%
0.83411
Sweden 73.7% 67.6% 97.5% 82.5% 94.9%
0.83212
Norway 71.3% 70.0% 83.2% 88.5% 100.0%
0.82613
Netherlands 77.8% 72.2% 89.8% 70.3% 94.0%
0.80814
Japan 75.0% 70.9% 91.0% 75.3% 86.7%
0.79815
Ireland 83.7% 76.1% 69.4% 87.3% 82.0%
0.79716
Germany 73.5% 70.9% 91.6% 72.7% 89.7%
0.79717
Luxembourg 80.0% 73.4% 79.9% 61.6% 94.1%
0.77818
Austria 73.7% 73.7% 81.3% 65.7% 91.2%
0.77119
Chile 81.8% 81.4% 67.6% 63.7% 87.3%
0.76420
Taiwan 72.0% 71.3% 85.6% 67.1% 84.2%
0.76121
South Korea 70.6% 67.7% 75.8% 80.3% 82.6%
0.75422
Belgium 71.2% 66.7% 80.7% 70.5% 84.7%
0.74823
France 62.9% 68.3% 82.6% 72.0% 86.8%
0.74524
Bahrain 82.2% 73.1% 62.5% 69.9% 75.2%
0.72625
Estonia 78.6% 75.9% 64.7% 80.3% 63.1%
0.72526
Cyprus 75.7% 72.5% 61.2% 66.5% 84.4%
0.72127
United Arab Emirates 67.6% 75.9% 74.4% 63.3% 77.1%
0.71728
Iceland 68.2% 67.4% 67.2% 80.9% 66.3%
0.70029
Israel 68.6% 56.5% 75.2% 64.0% 77.8%
0.68430
Slovakia 70.1% 73.5% 52.4% 61.0% 80.1%
0.67431
Spain 71.2% 67.4% 60.8% 61.0% 75.5%
0.67132
Lithuania 72.8% 68.8% 56.7% 72.8% 61.6%
0.665

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