The Policy Habits of Economically Successful Countries.

The Policy Habits of Economically The Policy Habits of Economically Successful CountriesSuccessful Countries

Lessons for Ukraine from Policies around the world

• Fraser Institute Program to measure 42 specific policies in 152 countries

• Objective to see what is the pattern of policies followed by the most successful countries

• Every policy examined is given a grade out of ten

• Ukraine’s policy score is then compared to the other 151 countries

Why Should Ukranians care about how their policies rank?

Because Countries whose policies earn them a high policy rank also

achieve better Economic and Social outcomes.

The World’s Top Ten Policy The World’s Top Ten Policy MakersMakers

Source: The Fraser Source: The Fraser Institute.Institute.

Per Capita Income and Policy Per Capita Income and Policy Score QuartileScore Quartile

Sources: The Fraser Institute; The World Bank, World Development Indicators, Sources: The Fraser Institute; The World Bank, World Development Indicators, 20132013

Income of the Poorest 10% and Income of the Poorest 10% and

Policy Score Policy Score

Sources: The Fraser Institute; The World Bank, World Development Indicators, Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.2013.

Policy Score and Political RightsPolicy Score and Political Rights

Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at http://www.freedomhouse.org/.2012, available at http://www.freedomhouse.org/.

Policy Score and Civil RightsPolicy Score and Civil Rights

Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at http://www.freedomhouse.org/.2012, available at http://www.freedomhouse.org/.

Policy Score and CorruptionPolicy Score and Corruption

Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2014 available at http://www.transparency.org.2014 available at http://www.transparency.org.

Policy Score and Policy Score and Life SatisfactionLife Satisfaction

Sources: The Fraser Institute; Happy Planet Index 2014Sources: The Fraser Institute; Happy Planet Index 2014

Literacy (% of population)Literacy (% of population)Male FemaleMale Female

Sources: The Fraser Institute; World Development Indicators 2013Sources: The Fraser Institute; World Development Indicators 2013

Policy Score and Life Policy Score and Life Expectancy at BirthExpectancy at Birth

Sources: The Fraser Institute; The World Bank, World Development Indicators, Sources: The Fraser Institute; The World Bank, World Development Indicators,

2013.2013.

ConclusionConclusion

Better Policy is associated with better Social and Economic

Outcomes

What is the connection between Policy and growth? • What is measured as economic growth consists

of :

• Real Cost Reduction – getting the same output for less real cost through innovation

• The extension of existing real cost technology to new members of the population or new regions

• The movement of workers within a country to sectors that have higher productivity – China for example

Real Cost Reduction

• In most cases, the real cost reduction that produces growth involves the reduction or elimination of some person’s income!

• The losers contrive to use the policies of government to protect their incomes.

• If they are successful the policies we observe will be anti-growth

• More importantly the policies will be anti-entrepreneurship because entrepreneurs bring the real cost reducing innovations

•

Policy Evaluation is acomparative process

• While we can conceive of “ideal” policies the real world is never ideal

• Practically speaking entrepreneurs and capital gravitate to the best available policy environment

• So the question is how does Moldova’s policy apparatus compare to everybody else’s?

Ukraine's Ranking 122/152

Ukra-ine's Top Ten

Ukra-ine's

Top Ten

Ukraine’s Policies compared to 152 Countries Rank Median Rank

Median

1A Government Consumption 94 694Ai Revenue from trade taxes (% of trade sector) 55 10

1B Transfers and subsidies 126 89 4Aii Mean tariff rate 16 141C Government enterprises and investment 1 1

4Aiii Standard deviation of tariff rates 22 24

1Di Top marginal income tax rate 1 41 4Bi Non-tariff trade barriers 113 241Dii Top marginal income and payroll tax rate 82 33

4Bii Compliance costs of importing and exporting 123 17

2A Judicial independence 134 16 4C Black market exchange rates 1 1

2B Impartial courts 151 124Di Foreign ownership/investment restrictions 125 23

2C Protection of property rights 138 11 4Dii Capital controls 131 212D Military interference in rule of law and politics 33 31 4Diii Freedom of foreigners to visit 86 40

2E Integrity of the legal system 49 13 5Ai Ownership of banks 66 1

2F Legal enforcement of contracts 60 27 5Aii Private sector credit 130 31

2G Regulatory restrictions on the sale of real property 45 42

5Aiii Interest rate controls/negative real interest rates 1 1

2H Reliability of police 129 75Bi Hiring regulations and minimum wage 92 32

2I Business costs of crime 55 22 5Bii Hiring and firing regulations 33 60

3A Money growth 74 865Biii Centralized collective bargaining 77 18

3B Standard deviation of inflation 126 58 5Biv Hours Regulations 56 1

3C Inflation: Most recent year 4 635Bv Mandated cost of worker dismissal 32 1

3D Freedom to own foreign currency bank accounts 120 1 5Bvi Conscription 130 1

5Ci Administrative requirements 132 175Cii Bureaucracy costs 30 1235Ciii Starting a business 75 135Civ Extra payments/bribes/favoritism 125 155Cv Licensing restrictions 44 295Cvi Tax compliance 131 17

Ukraine’s Particular ChallengePopulation Decline

Demographic Overview - Custom Region - UkraineDemographic Indicators 1995 2005 2015 2025

Population           Midyear population (in thousands) 51,245 46,959 44,009 41,038

   Growth rate (percent) -0.8 -0.7 -0.6 -0.8

Fertility           Total fertility rate (births per woman)

1.4 1.2 1.3 1.4

   Crude birth rate (per 1,000 population)

10 9 9 8

   Births (in thousands) 493 431 409 318

Mortality           Life expectancy at birth (years) 67 67 69 72

   Infant mortality rate (per 1,000 births)

14 10 8 7

   Under 5 mortality rate (per 1,000 births)

19 14 10 9

   Crude death rate (per 1,000 population)

15 16 16 15

   Deaths (in thousands) 793 774 690 626

Migration           Net migration rate (per 1,000 population)

-2 0 0 0

   Net number of migrants (in thousands)

-114 -7 -2 0

Source Information: Ukraine

Consequences of population Shrinkage

• Shrinking labour force aged population

• Shrinking potential output

• Increased relative burden of elderly

• Reduced tax base to support public pensions and other programs

• EVEN MORE REASON TO LIBERALIZE!

www.freetheworld.comwww.freetheworld.com

www.fraserinstitute.orgwww.fraserinstitute.org

Demographic Overview - Custom Region - RussiaDemographic Indicators 1995 2005 2015 2025

Population           Midyear population (in thousands) 148,758 143,320 142,424 140,139

   Growth rate (percent) 0 -0.5 0 -0.3

Fertility           Total fertility rate (births per woman) 1.3 1.3 1.6 1.6

   Crude birth rate (per 1,000 population) 9 10 12 9

   Births (in thousands) 1,364 1,458 1,652 1,244

Mortality           Life expectancy at birth (years) 65 66 70 73

   Infant mortality rate (per 1,000 births) 18 11 7 6

   Under 5 mortality rate (per 1,000 births) 22 14 9 7

   Crude death rate (per 1,000 population) 15 16 14 13

   Deaths (in thousands) 2,203 2,305 1,950 1,850

Migration           Net migration rate (per 1,000 population) 5 1 2 2

   Net number of migrants (in thousands) 768 163 241 241

Demographic Overview - Custom Region - GeorgiaDemographic Indicators 1995 2005 2015 2025

Population           Midyear population (in thousands) 5,041 4,790 4,931 4,930   Growth rate (percent) -1.8 1.8 -0.1 -0.1Fertility           Total fertility rate (births per woman) 1.9 1.5 1.8 1.7   Crude birth rate (per 1,000 population) 14 11 13 10

   Births (in thousands) 70 52 63 51Mortality           Life expectancy at birth (years) 73 75 76 78   Infant mortality rate (per 1,000 births) 39 23 16 12   Under 5 mortality rate (per 1,000 births) 41 24 18 13

   Crude death rate (per 1,000 population) 8 9 11 11

   Deaths (in thousands) 40 43 53 54Migration           Net migration rate (per 1,000 population) -23 16 -3 0

   Net number of migrants (in thousands) -118 76 -13 0