The Policy Habits of Economically Successful 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 Makers Source: The Fraser Institute.

Per Capita Income and Policy Score Quartile Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013

Income of the Poorest 10% and Policy Score Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.

Policy Score and Political Rights Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at

Policy Score and Civil Rights Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2012, available at

Policy Score and Corruption Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2014 available at

Policy Score and Life Satisfaction Sources: The Fraser Institute; Happy Planet Index 2014

Literacy (% of population) Male Female Sources: The Fraser Institute; World Development Indicators 2013

Policy Score and Life Expectancy at Birth Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.

Conclusion 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 a comparative 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'sTop Ten Ukra- ine's Top Ten Ukraine’s Policies compared to 152 CountriesRankMedianRank Medi an 1A Government Consumption9469 4Ai Revenue from trade taxes (% of trade sector)5510 1B Transfers and subsidies126894Aii Mean tariff rate1614 1C Government enterprises and investment11 4Aiii Standard deviation of tariff rates2224 1Di Top marginal income tax rate1414Bi Non-tariff trade barriers Dii Top marginal income and payroll tax rate8233 4Bii Compliance costs of importing and exporting A Judicial independence134164C Black market exchange rates11 2B Impartial courts Di Foreign ownership/investment restrictions C Protection of property rights138114Dii Capital controls D Military interference in rule of law and politics3331 4Diii Freedom of foreigners to visit8640 2E Integrity of the legal system49135Ai Ownership of banks661 2F Legal enforcement of contracts60275Aii Private sector credit G Regulatory restrictions on the sale of real property4542 5Aiii Interest rate controls/negative real interest rates11 2H Reliability of police1297 5Bi Hiring regulations and minimum wage9232 2I Business costs of crime55225Bii Hiring and firing regulations3360 3A Money growth7486 5Biii Centralized collective bargaining7718 3B Standard deviation of inflation126585Biv Hours Regulations561 3C Inflation: Most recent year463 5Bv Mandated cost of worker dismissal321 3D Freedom to own foreign currency bank accounts12015Bvi Conscription1301 5Ci Administrative requirements Cii Bureaucracy costs Ciii Starting a business7513 5Civ Extra payments/bribes/favoritism Cv Licensing restrictions4429 5Cvi Tax compliance13117

Ukraine’s Particular Challenge Population Decline

Demographic Overview - Custom Region - Ukraine Demographic Indicators Population Midyear population (in thousands)51,24546,95944,00941,038 Growth rate (percent) Fertility Total fertility rate (births per woman) Crude birth rate (per 1,000 population) Births (in thousands) Mortality Life expectancy at birth (years) Infant mortality rate (per 1,000 births) Under 5 mortality rate (per 1,000 births) Crude death rate (per 1,000 population) Deaths (in thousands) Migration Net migration rate (per 1,000 population) Net number of migrants (in thousands) 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!

Demographic Overview - Custom Region - Russia Demographic Indicators Population Midyear population (in thousands)148,758143,320142,424140,139 Growth rate (percent) Fertility Total fertility rate (births per woman) Crude birth rate (per 1,000 population) Births (in thousands)1,3641,4581,6521,244 Mortality Life expectancy at birth (years) Infant mortality rate (per 1,000 births) Under 5 mortality rate (per 1,000 births) Crude death rate (per 1,000 population) Deaths (in thousands)2,2032,3051,9501,850 Migration Net migration rate (per 1,000 population)5122 Net number of migrants (in thousands)

Demographic Overview - Custom Region - Georgia Demographic Indicators Population Midyear population (in thousands)5,0414,7904,9314,930 Growth rate (percent) Fertility Total fertility rate (births per woman) Crude birth rate (per 1,000 population) Births (in thousands) Mortality Life expectancy at birth (years) Infant mortality rate (per 1,000 births) Under 5 mortality rate (per 1,000 births) Crude death rate (per 1,000 population)8911 Deaths (in thousands) Migration Net migration rate (per 1,000 population) Net number of migrants (in thousands)