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    Assignment On Various Global Index With Respect To United States

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    Ajit Singh Ajimal
    The document discusses two global indices - the Global Competitiveness Index and the Economic Freedom Index. It provides details on how each index is calculated and what they measure. The Global Competitiveness Index evaluates a country's potential for economic growth based on productivity and efficiency. It ranks countries across 12 pillars grouped into three stages of development. The Economic Freedom Index measures the degree of economic freedom in countries based on personal choice, voluntary exchange, and protection of private property. It evaluates countries across factors such as government spending, tax rates, and trade freedom. The document also provides details on the United States' rankings in the Global Competitiveness Index over recent years.

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    Assignment On Various Global Index With Respect To United States

    Uploaded by

    Ajit Singh Ajimal
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    The document discusses two global indices - the Global Competitiveness Index and the Economic Freedom Index. It provides details on how each index is calculated and what they measure. The Global Competitiveness Index evaluates a country's potential for economic growth based on productivity and efficiency. It ranks countries across 12 pillars grouped into three stages of development. The Economic Freedom Index measures the degree of economic freedom in countries based on personal choice, voluntary exchange, and protection of private property. It evaluates countries across factors such as government spending, tax rates, and trade freedom. The document also provides details on the United States' rankings in the Global Competitiveness Index over recent years.

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    The document discusses two global indices - the Global Competitiveness Index and the Economic Freedom Index. It provides details on how each index is calculated and what they measure. The Global Competitiveness Index evaluates a country's potential for economic growth based on productivity and efficiency. It ranks countries across 12 pillars grouped into three stages of development. The Economic Freedom Index measures the degree of economic freedom in countries based on personal choice, voluntary exchange, and protection of private property. It evaluates countries across factors such as government spending, tax rates, and trade freedom. The document also provides details on the United States' rankings in the Global Competitiveness Index over recent years.

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    35 views12 pages

    Assignment On Various Global Index With Respect To United States

    Uploaded by

    Ajit Singh Ajimal
    The document discusses two global indices - the Global Competitiveness Index and the Economic Freedom Index. It provides details on how each index is calculated and what they measure. The Global Competitiveness Index evaluates a country's potential for economic growth based on productivity and efficiency. It ranks countries across 12 pillars grouped into three stages of development. The Economic Freedom Index measures the degree of economic freedom in countries based on personal choice, voluntary exchange, and protection of private property. It evaluates countries across factors such as government spending, tax rates, and trade freedom. The document also provides details on the United States' rankings in the Global Competitiveness Index over recent years.

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    of 12

    ASSIGNMENT ON

    VARIOUS GLOBAL INDEX WITH RESPECT


    TO UNITED STATES

    SUBMITTED BY:
    AKANKSHA BHATNAGAR
    PGDM (2014-16)
    SECTION- B
    ROLL NO. 22/003

    GLOBAL COMPETITIVENESS INDEX


    The Global Competitiveness Index is the accepted tool for evaluating a country's potential for
    growth. By comparing most of the world's countries, it provides insight into the comparative
    advantages of each. The "Global Competitiveness Index" (GCI) evaluates the productivity and
    efficiency of countries. For each individual country, the GCI enables decision makers to estimate
    the productivity of individual sectors and the economy as a whole.
    The Global Competitiveness Report (GCR) is a yearly report published by the World Economic
    Forum. Since 2004, the Global Competitiveness Report ranks countries based on the Global
    Competitiveness Index, developed by Xavier Sala-i-Martin and Elsa V. Artadi. Before that, the
    macroeconomic ranks were based on Jeffrey Sachs's Growth Development Index and the
    microeconomic ranks were based on Michael Porter's Business Competitiveness Index. The Global
    Competitiveness Index integrates the macroeconomic and the micro/business aspects of
    competitiveness into a single index.
    The report "assesses the ability of countries to provide high levels of prosperity to their citizens.
    This in turn depends on how productively a country uses available resources. Therefore, the Global
    Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable
    current and medium-term levels of economic prosperity. Since 2004, the report ranks the world's
    nations according to the Global Competitiveness Index. The report states that it is based on the
    latest theoretical and empirical research. It is made up of over 110 variables, of which two thirds
    come from the Executive Opinion Survey, which is a survey of a representative sample of business
    leaders in their respective countries, and one third comes from publicly available sources such as
    the United Nations. The GCI uses statistical data such as enrollment rates, government debt, budget
    deficit, and life expectancy. These data are obtained from internationally recognized agencies,
    notably the United Nations Educational, Scientific and Cultural Organization (UNESCO), the
    International Monetary Fund (IMF), and the World Health Organization (WHO).
    The variables are organized into twelve pillars, with each pillar representing an area considered as
    an important determinant of competitiveness. The report notes that as a nation develops, wages tend
    to increase, and that in order to sustain this higher income, labor productivity must improve for the
    nation to be competitive. Thus, the GCI organized these 12 pillars into three specific stages: basic
    requirements, efficiency-enhancers, and innovation-driven, each implying a growing degree of
    complexity in the operation of the economy.

    BASIC REQUIREMENTS: This sub-index measures the degree to which the environment
    enables factors of production (e.g. raw materials, physical and human capital) to participate
    in the economic marketplace. The pillars within this sub-index are: macroeconomic
    stability, the efficiency of private and public institutions, infrastructure, health and primary

    education. The GCI recognizes these categories as the key contributors to development for
    countries with GDP per capita less than $2,000, calculated at PPP.

    EFFICIENCY-ENHANCERS: This sub-index measures the factors contributing to the


    degree of productivity in the economy. The pillars within this sub-index are: higher
    education and training, market efficiency (in terms of products, labor, and capital), and
    technological readiness (an economys ability to adapt existing technologies).6 The GCI
    recognizes these categories as the key contributors to development for countries with GDP
    per capita between $3,000 and $9,000.

    INNOVATION AND SOPHISTICATION: This sub-index measures the factors that


    contribute to the development and manufacturing of new products. The pillars within this
    sub-index are: business sophistication and innovation. The GCI recognizes these categories
    as the key contributors to growth for countries with GDP per capita over $17,000.

    The GCI ranks countries according to their overall performance and also provides scores by subindex, pillars, and variables.

    GLOBAL COMPETITIVENESS INDEX WITH RESPECT


    TO UNITED STATES
    United States is one the country which is always mentioned in the global competitiveness index.
    The following table shows the overall rank and score for the last 5 years. The table also shows the
    rank and score of its 3 components- basic requirements, efficiency enhancers and innovation &
    sophisticated factors.

    YEAR
    2010-2011 (OUT
    OF 139)
    2011-12 (OUT OF
    142)
    2012-13 (OUT OF
    144)
    2013-14 (OUT OF
    148)
    2014-15 (OUT OF
    144)

    SUBINDEX
    OVERALL INDEX BASIC REQUIREMENTS EFFICIENCY ENHANCERS INNOVATION & SOPHISTICATION FACTORS
    RANK SCORE RANK SCORE RANK
    SCORE
    RANK
    SCORE
    4

    5.43

    32

    5.21

    5.46

    5.53

    5.43

    36

    5.21

    5.49

    5.46

    5.47

    33

    5.12

    5.63

    5.42

    5.48

    36

    5.12

    5.66

    5.43

    5.54

    33

    5.15

    5.71

    5.54

    8
    7
    6
    5
    4
    3
    2
    1
    0

    OVERALL INDEX
    RANK
    OVERALL INDEX
    SCORE

    The United States continues the decline that began in 2009-10, falling two more places to 4th
    position. While many structural features that make its economy extremely productive, a number of
    escalating weaknesses have lowered the US ranking over the past two years. There are some
    weaknesses in particular areas that have deepened since our last assessment. The evaluation of
    institutions has continued to decline, falling from 34th to 40th this year. The public does not
    demonstrate strong trust of politicians (54th), and the business community remains concerned about
    the governments ability to maintain arms-length relationships with the private sector (55th) and
    considers that the government spends its resources relatively wastefully (68th). A lack of
    macroeconomic stability continues to be the United States greatest area of weakness.
    Also in 2012-13, the downfall continues because of the same reasons.
    But in 2013-14, the United States goes up in the ranking and continues to raise its ranking in the
    year 2014-15 and regains the 3rd position on the back of improvements in a number of areas,
    including some aspects of the institutional framework (up from 35th to 30th), and more positive
    perceptions regarding business sophistication (from 6th to 4th) and innovation (from 7th to 5th). As
    it recovers from the crisis, the United States can build on the many structural features that make its
    economy extremely productive. US companies are highly sophisticated and innovative, and they are
    supported by an excellent university system that collaborates admirably with the business sector in
    R&D. Combined with flexible labor markets and the scale opportunities afforded by the sheer size
    of its domestic economythe largest in the world by farthese qualities make the United States
    very competitive.

    ECONOMIC FREEDOM INDEX


    The Index of Economic Freedom is an annual index and ranking created by The Heritage
    Foundation and The Wall Street Journal in 1995 to measure the degree of economic freedom in the
    worlds nations. The index published in Economic Freedom of the World measures the degree to
    which the policies and institutions of countries are supportive of economic freedom.
    The cornerstones of economic freedom are (1) personal choice, (2) voluntary exchange coordinated
    by markets, (3) freedom to enter and compete in markets, and (4) protection of persons and their
    property from aggression by others. Economic freedom is present when individuals are permitted to
    choose for themselves and engage in voluntary transactions as long as they do not harm the person
    or property of others. Individuals have a right to their own time, talents, and resources, but they do
    not have a right to take things from others or demand that others provide things for them. The use of
    violence, theft, fraud, and physical invasions are not permissible in an economically free society,
    but otherwise, individuals are free to choose, trade, and cooperate with others, and compete as they
    see fit.
    In an economically free society, the primary role of government is to protect individuals and their
    property from aggression by others. The EFW index is designed to measure the extent to which the
    institutions and policies of a nation are consistent with this protective function. The EFW measure
    is an effort to identify how closely the institutions and policies of a country correspond with a
    limited government ideal, where the government protects property rights and arranges for the
    provision of a limited set of public goods such as national defense and access to money of sound
    value, but little beyond these core functions. In order to receive a high EFW rating, a country must
    provide secure protection of privately owned property, even-handed enforcement of contracts, and a
    stable monetary environment. It also must keep taxes low, refrain from creating barriers to both
    domestic and international trade, and rely more fully on markets rather than government spending
    and regulation to allocate goods and resources.
    Milton Friedman believed that, if economic freedom could be measured with greater accuracy, this
    would enhance the ability of researchers to identify more clearly the key elements affecting the
    performance of economies. Political, legal, and cultural factors on the growth and development of
    economies. The EFW data set provides the most comprehensive measure of the degree to which
    countries rely on voluntary exchange and market institutions to allocate resources. A quality
    measure of differences in economic freedom across countries and over time is essential for the
    ongoing scholarly research in this important area.
    The index measures the degree of economic freedom present in five major areas: [1] Size of
    Government; [2] Legal System and Security of Property Rights; [3] Sound Money; [4] Freedom to
    Trade Internationally; [5] Regulation.

    Within the five major areas, there are 24 components in the index. Many of those components are
    themselves made up of several sub-components. In total, the index comprises 42 distinct variables.
    Each component and sub-component is placed on a scale from 0 to 10 that reflects the distribution
    of the underlying data. When subcomponents are present, the sub-component ratings are averaged
    to derive the component rating. The component ratings within each area are then averaged to derive
    ratings for each of the five areas. In turn, the five area ratings are averaged to derive the summary
    rating for each country. The following section provides an overview of the five major areas.

    1. Size of Government
    A. Government consumption
    B. Transfers and subsidies
    C. Government enterprises and investment
    D. Top marginal tax rate
    (i) Top marginal income tax rate
    (ii) Top marginal income and payroll tax rate

    2. Legal System and Property Rights


    A. Judicial independence
    B. Impartial courts
    C. Protection of property rights
    D. Military interference in rule of law and politics
    E. Integrity of the legal system
    F. Legal enforcement of contracts
    G. Regulatory restrictions on the sale of real property
    H. Reliability of police
    I. Business costs of crime

    3. Sound Money
    A. Money growth
    B. Standard deviation of inflation
    C. Inflation: most recent year
    D. Freedom to own foreign currency bank accounts

    4. Freedom to Trade Internationally


    A. Tariffs
    (i) Revenue from trade taxes (% of trade sector)
    (ii) Mean tariff rate
    (iii) Standard deviation of tariff rates
    B. Regulatory trade barriers
    (i) Non-tariff trade barriers
    (ii) Compliance costs of importing and exporting
    C. Black-market exchange rates
    D. Controls of the movement of capital and people
    (i) Foreign ownership/investment restrictions
    (ii) Capital controls
    (iii) Freedom of foreigners to visit

    5. Regulation
    A. Credit market regulations
    (i) Ownership of banks
    (ii) Private sector credit
    (iii) Interest rate controls/negative real interest rates

    B. Labor market regulations


    (i) Hiring regulations and minimum wage
    (ii) Hiring and firing regulations
    (iii) Centralized collective bargaining
    (iv) Hours regulations
    (v) Mandated cost of worker dismissal
    (vi) Conscription
    C. Business regulations
    (i) Administrative requirements
    (ii) Bureaucracy costs
    (iii) Starting a business
    (iv) Extra payments/bribes/favoritism
    (v) Licensing restrictions
    (vi) Cost of tax compliance

    EONOMIC FREEDOM INDEX WITH RESPECT TO


    UNITED STATES
    United States is one the country which is always mentioned in the Economic Freedom index. The
    following table shows the overall ratings (rank) for the last 5 years. The table also shows the ratings
    (rank) of its 5 components- size of government, legal system & property rights, sound money,
    freedom to trade internationally and regulations.

    LEGAL
    SYSTEM
    &PROPERTY
    RIGHTS

    SOUND
    MONEY

    FREEDOM TO
    TRADE
    INTERNATIONALLY

    REGULATIONS

    OVERALL
    RATINGS
    (RANK)

    7.50 (21)
    7.3 (24)

    9.69 (2)
    9.6 (11)

    7.57 (26)
    7.0 (48)

    7.89 (16)
    7.6 (27)

    7.81 (10)
    7.60 (10)

    7.14 (28)

    9.68 (7)

    7.46 (57)

    7.76 (31)

    2011 6.8 (59)

    7.0 (30)

    9.3 (37)

    7.7 (43)

    7.9 (28)

    7.69 (18)
    7.73
    (17)

    2012 7.0 (62)

    7.0 (28)

    9.3 (41)

    7.7 (40)

    8.1 (21)

    7.81 (12)

    SIZE OF
    GOVT.
    7.13
    2008 (43)
    2009 6.5 (65)
    6.43
    2010 (73)

    OVERALL RATINGS (RANK)


    7.85
    7.8

    7.75
    7.7
    7.65

    OVERALL RATINGS (RANK)

    7.6
    7.55
    7.5
    7.45
    1

    Throughout most of the period from 1980 to 2000, the United States ranked as the worlds third
    freest economy, behind Hong Kong and Singapore. The rating of the United States in 2000 was
    8.65, second only to Hong Kong. By 2005, the US rating had slipped to 8.20 and its ranking fallen
    to 9th. The slide has continued. The United States placed 15th in 2010 and 16th in 2011 before
    rebounding slightly to 14th in 2012. The 7.81 chain linked rating of the United States in 2012 is
    more than 8/10 of a point lower than the 2000 rating.
    While US ratings and rankings have fallen in all five areas of the EFW index, the reductions have
    been largest in the Legal System and Protection of Property Rights (Area 2), Freedom to Trade
    Internationally (Area 4), and Regulation (Area 5). The plunge in Area 2 has been huge. In 2000, the
    9.23 rating of the United States was the 9th highest in the world. But by 2012, the area rating had
    plummeted to 6.99, placing it 36th worldwide. The increased use of eminent domain to transfer
    property to powerful political interests, the ramifications of the wars on terrorism and drugs, and the
    violation of the property rights of bondholders in the auto-bailout case have weakened the tradition
    of strong adherence to the rule of law in United States. The expanded use of regulation in the
    United States has resulted in sharp rating reductions for components such as independence of the
    judiciary, impartiality of the courts, and regulatory favoritism.
    This implies that, unless policies undermining economic freedom are reversed, the future annual
    growth of the US economy will be only about half its historic average of 3%.

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