Benchmarking the drivers of business freedom: a network analysis of economic freedom indicators

Purpose This study aims to analyze the relationships among indicators within the Index of Economic Freedom, focusing on their collective influence on business freedom in diverse economic settings. By exploring these interactions, the research seeks to identify the most impactful drivers of business freedom to provide a better understanding for policymakers. Design/methodology/approach The study uses Bayesian Belief Networks to examine data from 176 countries, allowing for an assessment of the interdependencies among various economic freedom indicators. This method facilitates the identification of clusters of indicators that interact to drive business freedom. Findings The analysis reveals three key clusters of factors influencing business freedom. The first cluster, consisting of tax burden, trade freedom, monetary freedom and labor freedom, is found to have a direct positive impact on business freedom. The second cluster links investment freedom and financial freedom, while the third cluster highlights the critical interconnections among property rights, judicial effectiveness, government spending and government integrity. Among these, property rights and government integrity are identified as the most influential drivers of business freedom, while fiscal health shows limited impact. Originality/value This study provides a novel network-based perspective on the drivers of business freedom, contributing valuable insights into the complex interactions among economic freedom indicators. The findings offer actionable implications for policymakers, particularly those seeking to foster business freedom through targeted improvements in specific economic freedom indicators, tailored to varying national contexts.