IPRI 2016: Composition, Coverage and Methodology

 

I.                Property rights in the knowledge society

 

‘Simplicity is the ultimate sophistication’ 

Leonardo da Vinci

 

Since the end of the 20th century it has been stated that we are in the early stages of a Third Industrial Revolution, or more accurately, of a non-Industrial one. The notion ‘knowledge based society’ is a concept which attempts to grasp the multidimensional transformations which are taking place in the current society and serves also for the analysis of those alterations. It has its origins in the 1960s when, analyzing changes, the term ‘postindustrial society’ was coined. The concept expressed transition from an economy that produces products to one based on services, led by technically qualified professionals. In a 'knowledge society,' structures and processes of material and symbolic reproduction are so immersed in knowledge operations that information processing, symbolic analysis and expert systems take precedence over other factors, like capital and labor.

We are talking about the configuration of a new model of society, one in which everyone and everything is connected, all over the world and all the time, creating zillions of terabytes of data per picosecond. The topological structures of these networks are becoming the new appropriate models to look at societies, evaluated as complex systems, shaped by the collective action of individuals, and displaying emergent behaviors. Non-linearity, cascading failures, optimal interdependence and phase transitions are the focal points of current ongoing research.

Innovation is critical to this economic transition and so a Schumpeterian moment is in place: when creative destruction threatens the past and promises a future; a moment that embraces disruption instead of fighting it. There is a growing consensus citing the innovation triangle (science - economy - society) and the knowledge triangle (education - research - innovation) as the key roots of the success. As always in complex systems, a linear or simple relationship among these elements is not found and much remains to deepen our understanding yet.

While embracing complexity may be quixotic, ignoring it is not an option; and assessing the governance of these complex systems involves an understanding of the relevance of the underlying institutions. Appropriate and robust institutions would be those that show adaptability to changing conditions and favor appropriate synergies among individuals.

In a ‘knowledge society’, structures of stiff control are more quickly eroded and this type of society is characterized by the development of new rules. Therefore, ‘knowledge societies’ gain in flexibility, but also in fragility. Heterogeneity and self-organization overlaps the pretension of homogeneity and rigid control, and simple and basic rules, respecting the nature of the agents of the system, are best applied. In other words, a complex knowledge society can prosper sufficiently if it is backed by a moldable but robust backbone of institutional arrangement. And among these basic institutions is the property rights system.

Since the 1990s, there is considerable empirical literature dealing with the relationship between institutions and the improvement of social wellbeing, and particularly between property rights and social prosperity[1].

While classical economists gave a central position to the role of property rights in the process of economic development, the core welfare results of mainstream economics assumes that property rights are well defined and costlessly enforced. It is this new institutional approach that concerns effective property rights as the center of thoughts about development, defining them as endogenous to the system, evolving in time by the effects of political, economic and cultural forces. Effective property rights means that ownership structures are well defined having important effects on assets allocation (separating ownership from control), wealth distribution and consumption.

Besley and Ghatak (2010) address two areas concerning the relationship between property rights and development: the mechanisms through which property rights affect economic activity and the determinants of property rights. In the first they emphasize some economic costs of weak property rights by means of expropriation risk, unproductive costs to defend property, failure to facilitate gains and supporting other transactions. Their model concludes that increasing the security of property rights can reduce asset sub-utilization. Their results capture the mechanisms suggested by de Soto (2000) linking property rights’ increase of the use of assets as collateral and economic efficiency.

Other research finds similar positive links: Wang (2008) shows that the housing reform in China (allowing employees to buy state-owned houses) increased entrepreneurial ventures using houses as collateral; Johnson, McMillan and Woodruff (2002) found that weak property rights discourage profit reinvestment in post-communist countries; Galiani and Schargrodsky (2005) found that titled parcels in Argentina favored housing investment and child education; and Field and Torero (2004) revealed that urban land titling in Peru is associated with a 9-10% increase in loan approval rates from the public sector bank for housing construction materials, while finding no effect on the loan approval rate from private sector lenders.

However, the analysis of the impact of the property rights system is not an easy task: Domingo (2013) examines the evidence on the relationship between property rights and social and political empowerment, finding ambivalent evidence, basically because it needs to take account of the political and social relations in which property regimes are embedded; and Locke (2013) found contradictory evidence in the relationship of land rights and growth (through investment, credit and efficiency) due to the presence of factors other than property rights (i.e. skills) also of primary importance for growth, recognizing a ‘cluster of institutions’ that drive economic growth.

An important problem with economic and social dynamics, as with any other complex system, is the so-called problem of endogeneity: institutions cause development, but development also causes institutions. This is an issue recognized in the empirical literature but never fully solved. Paldam and Gundlach (2007) address this problem using two measures of institutional quality, democracy and corruption. In both cases they found mixed results on causality direction, but strong support on the interactions of institutions and income and development, and so of the creation of a virtuous circle.

In this way, enforcing a strong property rights system is a key element fostering economic growth as a linchpin of a multidimensional prosperity goal. However, assigning and administering property rights can be challenging. This is particularly true with respect to knowledge-based goods and economic use of some natural resources. In this sense, the environment and knowledge-based products will continue to be at the heart of the biggest potential conflicts on property rights in the 21st century.

To understand this issue it has to be noted that knowledge and information are not like other kind of physical goods widely traded in markets. They possess a specific characteristic referred as ‘non-rival in use’, that is, they can be used repeatedly and concurrently by many people, without being ‘depleted’. In this sense the allocation of intellectual property rights does not confer exclusive possession (as physical property rights) but of the benefits of its economic exploitation. This creates economic incentives for people to go on research and innovation, as well as finding new applications for old ideas. Intellectual property rights also tend to prevent ideas from remaining in secrecy, being shared with the whole society, encouraging creativity spillovers (David & Foray, 2003).

Most legal systems nowadays recognize three different kinds of intellectual property rights: trademarks, copyrights and patents:

·       A trademark is a word, name, symbol or device which is used in trade with goods to indicate the source of the goods and to distinguish them from others. A servicemark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product.

·       A copyright is a form of protection provided to the authors of original works of authorship including literary, dramatic, musical, artistic and intellectual works, published or unpublished.

·       A patent is the grant of a property of an invention to its creator. What is granted is not the right to make, use, offer for sale, sell or import, but the right to exclude others from making, using, offering for sale, selling or importing the creation.

In synthesis, trademarks distinguish products or services; copyrights apply to expressions, and not to ideas, procedures, or methods of operation, while patents apply to specific implementations of ideas. But in all cases we are talking about knowledge based rights.

There are other kinds of intellectual property rights: Industrial Designs and Geographical Indicators. An industrial design is somewhat similar to a particular type of trademark known as a ‘distinguishing guise’, the aesthetic aspect of an article (its shape, patterns, lines or colors). A geographical indication (GI) is a name or sign used on products corresponding to specific geographical origin, acting as a quality certification.

The main goal for promoting strong intellectual property rights is to fuel the creation of knowledge-based economies. Such legal infrastructure promotes innovation, and that new ideas would become products, leading to economic growth, job creation, economic productivity, sustained competitiveness in global markets, and improvement of social well-being.

Simultaneously there are critics addressed to instituting a system of intellectual property rights, saying that they could threat fair competition. This critic is mainly related to health related products and the concern that IP rights could rise their price. However, competition is not opposed to property rights. On the contrary, strong IP rights are a complementary dimension of a competitive economy whose main goal is the consumer’s benefit. This is because innovation is based on a dynamical perspective of competition, which creates dynamical efficiency (creative capacity) and not static efficiency (with fixed technology). The dynamical approach shows not only indecisive short term impacts, but positive ones in the medium and long term, which are not confined to a price reduction in time as a result of increased production, but also includes the promotion of positive side effects on other social spheres: education, research and innovation, endogenous development of technologies, and so on.

There is an important ongoing debate on this issue and, as in all social affairs; there are not easy or general ‘one-size-fits-all’ solutions. This controversy will not vanish soon. We are talking about complex systems, with multiple interactions and multidimensional dependence. But what it is very important is to understand the relevance of institutional arrangements in the aim of building productive, free and inclusive societies. A main building block of this institutional support is, with no doubt, a strong Property Rights System.

 

 

II.             IPRI Structure and Methodology

 

One of the most important things to achieve a goal is to evaluate its evolution in time and space, and for that, measuring is a key tool.  Since 2007, the Property Rights Alliance (PRA) - dedicated to the protection of property rights all around the world - instituted the Hernando de Soto fellowship to produce a yearly edition of the International Property Rights Index, IPRI.

The IPRI was developed to serve as a barometer for the status of property rights across the world. A vast review of the literature on property rights was done in order to conceptualize and operationalize a comprehensive characterization of property rights. Following convention set in place by previously compiled indexes, several experts and practitioners in the field of property rights were consulted to finalize the set of core categories (here referred to as “components” or ‘sub-indexes’) and the items that create the components.

The following are the three core components of the IPRI:

1. Legal and Political Environment, LP

2. Physical Property Rights, PPR

3. Intellectual Property Rights, IPR

 

The Legal and Political Environment (LP) component provides an insight into the strength of the institutions of a country, the respect of the ‘rules of the game’ among citizens; consequently, the measures used for the LP are broad in scope. This component has a significant impact on the development and protection of physical and intellectual property rights.

The other two components of the index - Physical and Intellectual Property Rights (PPR and IPR) - reflect two forms of property rights, both of which are crucial to the economic development of a country. The items included in these two categories account for both de jure rights and de facto outcomes of the countries considered.

The IPRI is comprised of 10 items in total, grouped under one of the three components: LP, PPR, or IPR. While considering numerous items related to property rights, the final IPRI is specific to the core factors that are directly related to the strength and protection of physical and intellectual property rights. Furthermore, items for which data was available both more regularly and in a greater number of countries were given preference. This was done to ensure that scores were comparable across countries and years.

The IPRI-2016 keeps previous years’ methodology to allow a full comparison of its results with previous editions.

 

II.1.     Legal and Political Environment (LP)

The Legal and Political Environment component grasps the ability of a nation to enforce a de jure system of property rights. In this sense there are considered four dimensions or sub-components: the independence of its judicial system, the strength of the rule of law, the control of corruption and the stability of its political system.

Judicial Independence

This item examines the judiciary’s freedom from influence by political and business groups. The independence of the judiciary is a central underpinning for the sound protection and sovereign support of the court system with respect to private property. For this item the chosen data source was the Global Competitiveness Index from the World Economic Forum’s 2015-2016.

(www3.weforum.org/docs/gcr/2015-2016/GCI_Dataset_2006-2015.xlsx).

Rule of Law

This item measures the extent to which agents have confidence in and abide by the rules of society. In particular, it measures the quality of contract enforcement, property rights, police, and courts, as well as the likelihood of crime and violence. The item combines several indicators including: fairness, honesty, enforcement, speed, affordability of the court system, protection of private property rights, and judicial and executive accountability. This item complements the judicial Independence variable. For this item the chosen data source was the World Bank Worldwide Governance Indicators, 2015

(http://info.worldbank.org/governance/wgi/index.aspx#homeDimension: Rule of Law).

Political Stability

The degree of political stability influences incentives to obtain or to extend ownership and/or management of property. The higher the likelihood of government instability, the less likely people will be to obtain property and to develop trust in the validity of the rights attached. For this item the chosen data source was the World Bank Worldwide Governance Indicators, 2015

(http://info.worldbank.org/governance/wgi/index.aspx#home Dimension: Political Stability and Absence of Violence).

Control of Corruption

This item combines several indicators that measure the extent to which public power is exercised for private gain. This includes petty and grand forms of corruption, as well as ‘capture’ of the state by elites and private interests. Similarly to the other items in the LP component, corruption influences people’s confidence in the existence of sound implementation and enforcement of property rights. Corruption reflects the degree of informality in the economy, which is a distracting factor to the expansion of respect for legal private property. A support for these ideas is the research by Dong and Torgler (2011) in which they give theoretical and empirical evidence of 108 countries from 1995-2006, showing that the effects of democratization on control of corruption depend on the protection of property rights and income equality, creating a virtuous circle.

The data chosen for this item was World Bank Worldwide Governance Indicators, 2015

 (http://info.worldbank.org/governance/wgi/index.aspx#homeDimension: Control of Corruption)

 

II.2.     Physical Property Rights (PPR)

A strong property rights regime commands the confidence of people in its effectiveness to protect private property rights. It also provides for unified transactions related to registering property and allows access to credit necessary to convert property into capital. For these reasons, the following items are used to measure private physical property rights protection (PPR).

Protection of Physical Property Rights

Many scientific research efforts have attempted to explain countries’ prosperity: Talbott and Roll (2001) found that enforcing strong property rights is among the main factors to the promotion of growth of GDP per capita. Meinzen-Dick, R., 2009 and Meinzen-Dick, Kameri-Mbote, and Markelova (2007) focus on the importance of property rights for poverty reduction.

The Protection of Physical Property Rights directly relates to the strength of a country’s property rights system based on experts’ views on the quality of judicial protection of private property, including financial assets. Additionally, it encompasses professionals’ opinions on the clarity of the legal definition of property rights. The data used to measure this sub-component was the Global Competitiveness Index of the World Economic Forum’s 2015-2016

 (www3.weforum.org/docs/gcr/2015-2016/GCI_Dataset_2006-2015.xlsx).

Registering Property

This item reflects businesses’ point of view on the complexity of registering property in terms of the number of days and procedures necessary. The data chosen for measuring this item was The World Bank Group’s 2015 Doing Business Report (http://www.doingbusiness.org/custom-query).This item records the full sequence of procedures necessary to transfer the property title from seller to buyer when a business purchases land and a building. This information is critical because the more difficult property registration is, the more likely it is that assets stay in the informal sector, thus restricting the development of the broader public’s understanding and support for a strong legal and sound property rights system. Moreover, registration barriers discourage the movement of assets from lower to higher valued uses. This item reflects one of the main economic arguments set forth by Hernando de Soto: “what the poor lack is easy access to the property mechanisms that could legally fix the economic potential of their assets so they could be used to produce, secure or guarantee greater value in the extended market” (2000:48). This item is calculated as:

Ease of Access to Loans

Access to a bank loan without collateral serves as a proxy for the level of development of financial institutions in a country. Financial institutions play a complementary role, along with a strong property rights system, to bring economic assets into the formal economy. An important channel trying to alleviate poverty had been credit facilities. Singh and Huang (2011) in a research of 37 countries in Sub-Saharan Arica from 1992-2006 conclude that not only do property rights reinforce the effect of narrowing inequalities with financial deepening, but that its absence could be in detrimental to the poor.

The data chosen for this item was The Global Competitiveness Index World Economic Forum’s 2015-2016

 (www3.weforum.org/docs/gcr/2015-2016/GCI_Dataset_2006-2015.xlsx)

 

II.3. - Intellectual Property Rights (IPR)

The Intellectual Property Rights component evaluates the protection of intellectual property. In addition to an opinion-based measure of the protection of intellectual property, it assesses protection of two major forms of intellectual property rights (patents and copyrights) from de jure and de facto perspectives, respectively.

A number of empirical studies exist on the relationship among IPRs, R&D, productivity and economic performance: Diwan and Rodrik (1991) and Taylor (1994) find that stronger IPRs may enhance global welfare, innovation, and productivity. Korenko (1999) found that, for the Italian pharmaceutical industry, a strengthening of local intellectual property rights helped expand domestic R&D and market share. And as confirmed in a recent paper by Zhang, Du and Park (2015) there is a positive relationship between IPRs and economic growth.

Protection of Intellectual Property Rights

This item contains opinion survey outcomes reflecting a nation’s protection of intellectual property; therefore, it is a crucial aspect of the IPR component. Expert participants in each country were asked to rate their nation’s IP protection, scoring it from “weak and not enforced” to “strong and enforced.” The source of the data chosen to measure this item was the Global Competitiveness Index from The World Economic Forum’s 2015-2016

 (www3.weforum.org/docs/gcr/2015-2016/GCI_Dataset_2006-2015.xlsx).

Patent Protection

This item reflects the strength of a country’s patent laws based on five extensive criteria: coverage, membership in international treaties, restrictions on patent rights, enforcement, and duration of protection. The data used for this item was from Ginarte-Park Patent Protection (1960-2010, International Patent Protection: 1960-2005, Research Policy, 2008, Vol. 37(4):761-766. Specific Source: http://nw08.american.edu/~wgp/#PR Data: 2010). This data source is updated each five years and data 2015 will be released ending 2016.

Copyright Piracy

The level of piracy in the IP sector is an important indicator of the effectiveness of intellectual property rights enforcement in a country. The data source chosen for this item was the BSA Global Software Survey; The Compliance Gap (June 2014 edition, http://globalstudy.bsa.org/2013/downloads/studies/2013GlobalSurvey_Study_en.pdf), which estimates the volume and value of unlicensed software installed on personal computers, and also reveals attitudes and behaviors related to software licensing, intellectual property and emerging technologies.

 

 

 

III.       Methodology

 

The IPRI’s 2016 scores and rankings are based on data obtained from official sources made publicly available by established international organizations (see Appendix I).This means that most data is provided in different styles and on different scales. Consequently, most of the data is rescaled in order to accurately compare among countries and within IPRI’s individual components and overall score.

The overall grading scale of the IPRI ranges from 0 to 10, where 10 is the highest value for a property rights system and 0 is the lowest value (i.e. most negative) for a property rights system within a country. The same interpretative logic is applied to the three components and the ten items. While the average mechanisms applied assumes equal importance of each component for the final IPRI score (and also of each item for each component), some weights could be applied to evaluate relative importance of the different aspects of a property rights system of a country.

The IPRI for 2016 uses data from period 2010 - 2016. The 10 Items are collected from different sources, which imply that they have different accessibility times for the most updated data available. The applied logic in the analysis has been to include the latest available data sets for the 2016 IPRI. Most of the items present a lag of 1 year (see Appendix I), so the time difference among data, should not affect our analysis. Almost all the items needed to be rescaled to the IPRI range.  The rescaling process was done as follow:

1.         For bounded data series with same direction:

 

2.         For unbounded data series with same direction:

 

3.         For bounded data series with inverse direction:

 

IPRI Calculations:

 

 

 

 

Besides calculating the score of the IPRI and its components, countries were ranked according to their scores. With some frequency, a few countries can exhibit almost the same score and they will be placed in the same rank. This way, i.e., Country A could be ranked #1, while Country B and Country C #2, and Country X, Country Y and Country Z are #3. To minimize this situation and a diffusion bias, ranking calculations were made using IPRI scores with all their decimals, this way the final scores were differentiated, and such were the ranking positions.

 

 

III.1     Countries and Groups

 

The 2016 IPRI ranks a total of 128 countries from around the world. This year we have a reduction in one country as in 2015 they were 129. More specifically this year there are five (5) countries that are not included in the index: Angola, Burkina Faso, Libya, Puerto Rico and Rep. of Yemen, while four (4) were added: Benin, Bosnia-Herzegovina, Ecuador and Liberia.

The selection of countries was determined only by the availability of sufficient data. In order to keep the meaningfulness of the data and analysis, only country-year combinations respecting specific rules have been considered.

Since the IPRI 2013, such a rule is to have at least 2/3 of the data required for each component, or more specifically, if a country does not have data available for at least 3 items for LP, 2 items for PPR and 2 items for IPR, it has been excluded from the analysis.

All countries were grouped following different criteria (Appendix II):

1.     Geographical regions: Latin America and Caribbean, Western Europe, Central/Eastern Europe and Central Asia, Middle East/North Africa, Africa, Asia and Oceania, and North America

2.     Income classification (World Bank, July, 2015): High income, Upper middle income, Lower middle income and Low income. This year the sub-classification for High Income (OECD and non-OECD) is not included by the World Bank, however we kept track of it.

3.     Regional and Development classification (International Monetary Fund, April, 2015): Advanced Economies; Emerging & Developing Asia; Emerging and Developing Europe; Middle East, North Africa & Pakistan; Latin America & the Caribbean; Commonwealth of Independent States; and Sub-Saharan Africa

4.     Economic and Regional Integration Agreements: European Union, Southern African Development Community, Economic Community of Western African States, Association of Southeast Asian Nations, Central American Parliament, Gulf Cooperation Council, Pacific Alliance, southern Common Market, South Asian Association for Regional Cooperation, Central African Economic and Monetary Community, Central American Common Market, Commonwealth of Independent States, Arab Maghreb Union, Caribbean Community, Andean Community, European Free Trade Association, Intergovernmental Authority on Development, North American Free Trade Agreement, Organization of the Petroleum Exporting Countries, Economic Community of Central African States and Trans-Pacific Partnership. 

 

IV.       IPRI 2016 Country Results

 

This chapter presents the results of the 2016 International Property Rights Index. Starting from the scores of the overall IPRI and its three (3) components, we follow showing countries’ ranking of the IPRI and its components. Variations between 2015 and 2016 of both individual IPRI components and of the overall IPRI score were considered. This chapter also includes an analysis of the IPRI for countries aggrupation.

As an average, the sample of the 128 countries yielded this year an IPRI score of 5.45, with the Legal and Political Environment (LP) being the weakest component with a score of 5.13, followed by the Intellectual Property Rights (IPR) component with a score of 5.33 and Physical Property Rights (PPR) as the strongest component with a score of 5.87. This year we found an overall improvement of the IPRI score compared to 2015, and also of all of its components.

Using SPSS® a normality test was run for IPRI as for its components, showing a Gaussian behavior. The IPRI, LP and IPR showed multimodal distributions, while PPR a unimodal one (see Table 1, Table 2 and Figure 2).

                                                                              

Table 1.Statistics: IPRI and its Components

 

IPRI

LP

PPR

IPR

N

Valid

128

128

128

128

Missing

0

0

0

0

Mean

5.445881

5.130273

5.874578

5.332734

Std. Error of Mean

.1263714

.1610364

.0985457

.1470181

Median

5.091350

4.648500

5.789500

5.085500

Mode

2.7297(a)

3.5820(a)

4.9100

4.3200(a)

Std. Deviation

1.4297296

1.8219192

1.1149174

1.6633194

Variance

2.044

3.319

1.243

2.767

Range

5.6471

7.2530

6.6120

6.9520

Minimum

2.7297

1.7550

1.6000

1.6800

Maximum

8.3768

9.0080

8.2120

8.6320

Percentiles

25

4.472375

3.670000

5.138500

4.209250

50

5.091350

4.648500

5.789500

5.085500

75

6.356600

6.450750

6.759250

6.437000

 

a  Multiple modes exist. The smallest value is shown

 

 

Table 2.Tests of Normality:    One-Sample Kolmogorov-Smirnov Test

 

IPRI

LP

PPR

IPR

N

128

128

128

128

Normal Parameters(a,b)

Mean

5.445881

5.130273

5.874578

5.332734

Std. Deviation

1.4297296

1.8219192

1.1149174

1.6633194

Most Extreme Differences

Absolute

.112

.135

.074

.087

Positive

.112

.135

.074

.083

Negative

-.073

-.072

-.047

-.087

Kolmogorov-Smirnov Z

1.271

1.522

.835

.983

Asymp. Sig. (2-tailed)

.079

.019

.488

.289

 

a  Test distribution is Normal.b  Calculated from data.

 

Figure 2.  IPRI Histogram

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Table 3 shows -alphabetically ordered- the score value of the 128 countries included in the IPRI 2016, as the scores of its components: Legal and Political Environment (LP), Physical Property Rights (PPR) and Intellectual Property Rights (IPR). Figure 3 presents countries organized by its IPRI ranking from top to bottom, showing simultaneously their IPRI scores.

Table 4 shows the IPRI 2016 rankings by quintile for all the 128 countries in our sample. In general, the number of countries belonging to each quintile increases from the top 20% to the bottom 20% (1st quintile 17 countries, 2nd quintile 21 countries, 3rd quintile 25 countries, 4rd quintile 29 countries and 5th quintile 36 countries).  Hence, the forth and the fifth quintiles include 65 countries which is a 50.7% of our sample, while the first three quintiles includes almost the same amount countries, 63, being the 49.2% of the sample.

 

Table 3. IPRI 2016. IPRI and its Components Scores by Country

 

Figure 3. IPRI 2016: Scores and Rankings

[View Graphic]

 

 

Table 4. IPRI 2016. Rankings by Quintiles

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Figure 4 shows the top 15 countries in this IPRI issue. Finland is #1 in the IPRI overall ranking (8.38), followed by New Zealand (8.27), Luxemburg (8.26), Norway (8.25) and Switzerland (8.16). Interestingly, Scandinavian countries report high IPRI score rankings (Norway #4, Sweden #7 and Denmark #11). Sweden and Japan scores show a difference of just seven ten thousandths (Sweden: 8.0985 Japan: 8.0978) while the difference between Denmark and Australia is of seven thousandths. At the end of this top list we find Hong Kong (7.78), United Kingdom (7.76) and the USA (7.74).

Figure 4. IPRI 2016. Top 15 Countries

[View Graphc

Considering the IPRI components we find that: New Zealand shows the highest LP score (9.01), followed by Finland (8.87) and Norway (8.75); while Qatar (8.21), Singapore (8.16) and Norway heads the PPR scores and USA (8.63), Japan (8.62) and Finland (8.59) the IPR ones.

Most of the top countries show as the stronger IPRI component the LP (though not the case for the UK and USA) while the PPR is less relevant.

Top countries’ positions vary just a little from the previous IPRI edition, but the group of countries remains the same and countries’ scores differ slightly (see Figure 5).

 

Figure 5.IPRI 2016 vs IPRI 2015. Top Countries Ranking Change

[VIEW GRAPHIC]

The bottom 15 countries are shown in Figure 6. The Bolivarian Rep. of Venezuela is #128 in the IPRI overall ranking (2.73) followed by Myanmar (2.76), Bangladesh (2.77), Haiti (2.84), Zimbabwe (3.40), Burundi (3.44), Nigeria (3.56), Pakistan (3.68), Moldova (3.72) Mauritania (3.73), Chad (3.74), Lebanon (3.83) Madagascar (3.84), Ukraine (3.93) and Nicaragua (3.98).

Considering the IPRI components we find the following: LP bottom countries are: Bolivarian Rep. of Venezuela is #128 (1.76), Chad (2.38), Ukraine (2.43), Nigeria (2.49) and Burundi (2.50). PPR bottom countries are: Haiti (1.6) Bangladesh (2.87), Myanmar (3.752), the Bolivarian Rep. of Venezuela (3.81) and Zimbabwe. And IPR bottom countries are: Myanmar (1.68), Moldova (2.27), Bangladesh (2.39), Georgia (2.45) and the Bolivarian Rep. of Venezuela (2.63).

Most of the bottom countries show PPR as the stronger IPRI (though not the case for Haiti and Bangladesh) with the weakest being LP. This situation is just the opposite of top countries and seems to hint at the ability of LP to pull the rest of components.

Figure 6. IPRI 2016. Bottom 15 Countries

[View Graphic]

 

A comparison between the IPRI scores in 2016 and 2015 reveals an improvement, not only in the averages of the IPRI scores and of its components but also in the maximum and minimum level showed by the sample of countries (see Figure 7). In 2015 the lowest score was 2.5 (Myanmar), while this year it is 2.73 (Bolivarian Rep. of Venezuela). IPRI 2015 the highest score was 8.32 and this year is 8.38 (in both cases held by Finland). This reveals an improvement of the average IPRI score from 5.3 in 2015 to 5.45 in 2016.

Countries that show the highest improvement in the IPRI are: Cote D’Ivoire (0.509), Lebanon (0.361), Slovenia (0.357), Georgia (0.352) and Honduras (0.337). While the ones with highest decreases in the IPRI scores 2016 are: Oman (-0,172), Hungary (-0.161), Ghana (-0.155), Swaziland (-0.141) and Bolivia (-0.129). It is important to note that the main positive and negative changes were in Europe, Latin America, Africa and the Middle East.

These evaluations were also made of IPRI components:

·       We found an improvement of the average score of the LP component from 4.99 in 2015 to 5.13 in 2016. Changes in the LP component score 2015-2016 are shown in Figure 8. The LP component shows an improvement in most of the countries, with the most significant increases in Cote d’Ivoire (0.695), Georgia (0.547), Kazakhstan (0.4856), Nepal (0.484) and Bangladesh. Most of these countries do not show high levels of the LP component. However, this improvement is encouraging. On the other hand, Ukraine (-0.408), Bolivia (-0.339), Hungary (-0.330), Qatar (-0.2378) and Swaziland (-0.237) show the highest decreases in the LP component.

·       Changes in PPR component score from 2015-2016 are shown in Figure 9. PPR also showed an average improvement rising from 5.77 to 5.87 in 2016. The most significant increases in the PPR component are reported by Slovenia (0.718), Myanmar (0.491, Cote d’Ivoire (0.394), Iran (0.304) and Uganda (0.285), while the highest decreases are shown by Madagascar (-0.279), India (-0,168), Hungary (-0.159), Jordan (-0.145) and Armenia (-0.109).

·       Changes in the IPR component score from 2015-2016 are shown in Figure 10. The IPR component average rose from 5.14 in 2015 to 5.33 for 2016. The most significant increases in the IPR component are reported by Lebanon (0.686), Gabon (0.585), Mali (0.502), Uganda (0.494) and Cote d’Ivoire (0.436); while the countries that showed the most relevant decreases are Oman (-0.369) Swaziland (-0.307), Ghana (-0.1815), Sierra Leone (-0.149) and Mauritania (-0.124).

Figure 7. IPRI Score 2016-2015 and variation

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Figure 8. LP Score 2015-2016 and variation

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Figure 9. PPR Score 2015-2016 and variation

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Figure 10. IPR Score 2015-2016 and variation

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1. See among others: F.A. Hayek, 1960; Milton Friedman, 1962; A. Rand, 1964; Alchian & Demsetz, 1973; Demsetz, 1967; Nozick, 1974; R. A. Epstein, 1985, 1995; J. M. Buchanan, 1993;J. V. Delong, 1997; North 1981, 1990, Richard R. Pipes, 1999; Von Mises, L., 2002, De Soto, 2000; De Soto & Cheneval, 2006; Barzel, 1997, Knack& Keefer, 1995; Hall & Jones, 1999; Acemoglu et al. 2001, 2002, 2005;Acemoglu& Johnson, 2005; Easterly & Levine, 2003;Rodriket al. 2004;Feyrer&Sacerdote, 2009; Hansson, 2009; T. R. Machan, 2002; Sandefur, 2006; Waldron, 2012. For dissenting views see Glaeser et al., 2004 and Angeles, 2010. 

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5 SWITZERLAND 8.2
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