Measuring Mexico's Economic Freedom

July 11, 2008

2008 Economic Freedom Annual ReportThe information compiled by Nathan Ashby, an Assistant Professor of Economics at UTEP, is part of “Economic Freedom of North America: 2008 Annual Report,” which was published July 9 by the Vancouver-based Fraser Institute, an international economic think tank.

The book focuses on the main factors in building prosperity and growth within the states of the U.S. and Mexico and the provinces of Canada. 

Ashby said that a lack of time and resources limited his ability to align some of Mexico’s economic variables, but he hoped he was able to paint a clear enough picture to start a dialogue.

“I hope this will generate some interest – good or bad,” he said recently. He called his initial effort “preliminary” and said he welcomed any constructive feedback to his good faith effort. “I’m open to any of it. There may be many people in Mexico who could point out how it could be improved.”

The book measures economic freedom on three levels: ones ability to control their own property without being overtaxed, to make a deal with limited government involvement, and to allow potential employers and employees to come to an agreement without use of force.

The scale goes from zero to 10 with 10 being the best. The Mexican state of Chihuahua earned a 7.5.  It placed fourth among Mexico’s 31 states. Nuevo Leon, the state southwest of Laredo, ranked first with an 8.2. Many of the states that fared the best were located in the northern part of the county.

Ashby was picked to write the chapter because of his expertise about Mexico and economic freedom issues, Fred McMahon, director of the Fraser Institute’s Globalization Studies and co-author of the report, wrote in an e-mail.

McMahon gave credit to Ashby for being able to wrap his wits around information about Mexico’s economy that can be hard to get and harder to square with other data.

For example, Ashby used seven components to create an index to rank Mexican states. U.S. states and Canadian provinces were ranked on a 10-component index. Components included size of government, taxation, labor market freedom, the legal system and property rights.

“We needed someone of Nathan’s understanding to begin this process,” he said. “Nathan has filled a big hole.”

Ashby, who earned his doctorate in economics from West Virginia University, began his research in November 2006. He joined the UTEP faculty last August and turned in his chapter this past January.

He gave a lot of credit to the administrators within the College of Business Administration for the university’s financial help and support and the resources within the University Library that made his contribution possible.

“This was an honest-to-God important sort of project in the sense that people do pay attention,” Tim Roth, chairman of the Department of Economics and Finance, said.

The information is used by private companies, the International Monetary Fund and the World Bank to make investment decisions that impact support for an array of projects, Dr. Roth said.

“We are pleased that Nathan, a new member of our faculty, is the author,” he said.

As for conclusions, Ashby shied away from any direct comparisons among countries.

“It’s hard to say how (Mexico) came out. Comparing Mexico and the U.S. is like comparing oranges and apples,” he said.

However, the book compared Mexico’s numbers to an international index. The country was tied for 44th in economic freedom with seven other nations: Bahamas, Bahrain, Georgia, Guatemala, Israel, Mongolia and Spain.

The same index found that the United States and Canada were tied for fifth. They were topped by Hong Kong, Singapore, New Zealand and Switzerland, in that order.

– Daniel E. Perez, University Communications


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