DEVELOPMENT
The pdf-version - Eesti Koostöö Kogu
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Figure 4.1.3<br />
Components of economic freedom in Estonia 1995–2010,<br />
on a scale of 1 to 10 (FI)<br />
2010 2005 2000 1995<br />
Kokku<br />
Regulation<br />
incl.<br />
business<br />
incl.<br />
labour market<br />
incl.<br />
credit market<br />
Free trade<br />
“Health”<br />
of money<br />
Rule of law<br />
Size of<br />
government<br />
Source: Fraser Institute<br />
0 2,00 4,00 6,00 8,00<br />
0 2,00 4,00 6,00 8,00<br />
Figure 4.1.4<br />
The components of business freedom in Estonia in 2013<br />
(ranking: the bigger it is, the worse it is)<br />
based on 42 individual indicators, in the following five<br />
basic areas:<br />
• Size of Government: Expenditures, Taxes, and<br />
Enterprises<br />
• Legal Structure and Security of Property Rights<br />
• Sound Money<br />
• Freedom to Trade with Foreigners<br />
• Regulation of Credit, Labor, and Business<br />
The ranking (see Annex) is led by Singapore and Hong<br />
Kong, and Switzerland in Europe. Finland was at a<br />
respectable 9th position. Estonia (Figure 4.1.3) has been<br />
given this composite evaluation since 1995, when it<br />
achieved 5.6 points, on a scale of 10, and placed 75th.<br />
By 2005, Estonia had risen to 8th place, with 8 points,<br />
and was, thus, especially mentioned in the report. The<br />
greatest improvement has appeared in the loan market,<br />
and in the “health” of money. A small backslide was<br />
noticeable in the freedom of foreign trade, which was<br />
related to the implementation of the EU’s uniform trade<br />
policy. Unlike the World Economic Forum, the Fraser<br />
Institute considers the weakest link in Estonia to be the<br />
freedom of the labour market. 9 During the crisis years,<br />
Estonia’s economic freedom declined to 7.7 points, and<br />
it ranked 16th and 17th, in 2009 and 2010, respectively.<br />
The main culprit is the size of the government, which,<br />
nevertheless, achieved a level of more than 6 points. It is<br />
here that the endogenous nature of institutional quality<br />
evaluations becomes apparent, i.e. dependence on real<br />
economic development, which does not make it possible<br />
to consider these assessment results to be purely indicative<br />
of development potential.<br />
Another well-known measure of economic freedom<br />
is the Heritage Foundation’s Index of Economic Freedom,<br />
which includes ten components with 50 individual indicators.<br />
Starting in 2006, it also uses a scale of 1 to 100. In<br />
2012, the ten components were grouped into four main<br />
categories:<br />
• Rule of Law (property rights, freedom from<br />
corruption);<br />
Fulfilling<br />
contracts<br />
Bankruptcy<br />
proceedings<br />
Summary<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Business<br />
start-up<br />
Getting a<br />
building<br />
permit<br />
• Limited Government (fiscal freedom, government<br />
spending);<br />
• Regulatory Efficiency (business freedom,<br />
labor freedom, monetary freedom); and<br />
• Open Markets (trade freedom, investment freedom,<br />
financial freedom).<br />
Cross-border<br />
trading<br />
Paying taxes<br />
Source: World Bank<br />
Investor<br />
protection<br />
Getting loans<br />
Getting<br />
electricity<br />
Property<br />
registration<br />
The composite index is the arithmetic average of ten components.<br />
In 2012, 184 states were included in the survey,<br />
with 179 providing full sets of data.<br />
Here too, numerous studies have confirmed that<br />
economic freedom has a significant statistically and substantively<br />
positive connection to economic development<br />
– with both its level and growth. The Heritage Foundation<br />
itself has examined the impact of the changes in<br />
economic freedom on economic growth, and has come<br />
9 Contradictory assessments, in various rankings, are one of the reasons why the labour market has warranted a separate chapter in this report.<br />
Estonian Human Development Report 2012/2013<br />
153