Executive Summary

The study adapts the indexes that the Fraser Institute, The Heritage Foundation, Pacific Institute and Cato Institute prepare for the international scene and which also compare the U.S. states. Globally, the index has already shown success, perhaps because of the failure of planned economies. However, the Autonomous State of Spain has developed an extensive regulatory body, a large bureaucracy and manages a growing part of public spending, so it is increasingly important to study economic freedom at the regional level.

In the ranking, Madrid holds the first position, having quite a distance from the remaining Autonomous Communities, boosted by its good data on Public Expenditure, Housing, Commerce and Public Employment. Navarra and La Rioja got the silver and bronze medals, respectively. The Basque Country, Balearic Islands, Castile and León and the Canary Islands get a B; Aragon, Valencian Community, Catalonia, Cantabria and Murcia get A; while Asturias, Galicia, Castilla-La Mancha, Andalusia and Extremadura appear in the last positions. They just fail.

In the Index of Economic Freedom 2011, it is noted that these last positions are occupied by the same autonomous communities as in the previous edition, while in the middle positions there is more movement due to the fall of the Valencian Community, Murcia and Catalonia. In the leading positions the Basque Country and Navarra appear for the first time, as these were not included in the previous index.

The 12 variables

To prepare the Index of Economic Freedom 2011, twelve variables have been taken into account, six more than in the 2008 edition. To regulatory indicators such as Commerce, Education, Environment, Mobility, Health and Housing, new ones have been added this year, all related to the weight of the State with respect to GDP. Namely, Public Expenditure, Tax Effort, Public Debt, Public Employment, Taxes and Transfers.

The first six indicators take into account the areas in which most of the economic activities are carried out, such as Commerce or Health, and two transversal ones are included: Environment and Mobility.

On the other hand, the inclusion of expenditure indicators is due to the need to also weigh some variables that are increasingly important, because regional expenditure is increasing. In addition, tax competition between the different communities has given prominence to regional taxes and tax tranches, making tax policies play an increasingly important role in the Autonomous Communities.