An ordinal ranking of economic institutions

ABSTRACT

We provide the first ranking of countries’ economic institutions using an ordinal methodology. Using the five areas of the Fraser Institute’s Economic Freedom of the World (EFW) index, we find that final rankings of a country’s institutions are sensitive to the importance-ordering of Area 1 (Size of Government). When Areas 2–5 are in the most important position, we find that there is no significant difference between the EFW rankings and our rankings. When Area 1 is placed in the most important position, however, a number of European countries with large welfare states but good governance do poorly.

KEYWORDS:

• Economic freedom
• ordinal
• Net Dominance Metric

JEL CLASSIFICATION:

• E00
• O23

Acknowledgements

We thank workshop participants in Suffolk University’s Department of Economics for helpful comments and suggestions. Bob Elder and Cheryl Han benefited from the Sanger Summer Scholars programme at Beloit College, and they sincerely thank Jim and Marge Sanger for financial support. The authors also thank Ann Davies, Robert Lawson, Dan Sutter, Charles Westerberg, and Rachael Wogsland for their helpful comments. The contents of the paper are the sole responsibility of the authors, and they do not reflect the views of Jim and Marge Sanger or those who administer the Sanger Summer Scholars programme at Beloit College.

Disclosure statement

No potential conflict of interest was reported by the authors.