The three groups of countries described in this chapter can be contrasted in terms of degree of economic freedom. It refers to the extent to which economic activities in a nation can take place freely and without government restrictions.

Various organizations have developed indexes of economic freedom, including the Cato Institute (www.cato.org), the Heritage Foundation (www.heritage.org), and the Fraser Institute (www.fraserinstitute.org). In measuring economic freedom, such indexes consider factors such as trade policies, extent of government intervention, monetary policies, inward foreign direct investment, property rights, and commercial infrastructure. Countries are classified into categories such as free, mostly free, mostly unfree, and repressed. Explore one of the economic freedom indexes by visiting one of the mentioned sites and entering “economic freedom” in the search engine. How are emerging market and developing economies classified? What is the relationship between market liberalization and economic development? How might market liberalization contribute to reducing poverty in developing economies?

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