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    Liberdom Index methodology

    Liberdom Index 2010 summarized in a single indicator the institutional framework of 137 economies worldwide. The index includes data relating to the exercise of civil, political and economic liberties and governance. Information on economic freedom comes from the Fraser Institute, which summarizes 42 variables grouped into five dimensions. The World Bank is the source of information on governance. Given that this institution does not provide an aggregate indicator of governance, but six components, for the calculation of the Liberdom index such aggregation is performed by factorial analysis technique to obtain a governance indicator that reflects the common part of these components to each of the countries included in the analysis. Information on civil and political liberties comes from the five dimensions offered by The Economist.

    Liberdom Index added three institutional perspectives through factor analysis statistical methodology that allows the reduction of the quantitative analysis and aggregation of highly correlated data. By the extraction method of principal components were obtained by a single component that summarizes, in the Liberdom index, the three areas mentioned, economic freedom, governance and democracy, with an explanatory power of 84% of the original variance.

    Liberdom Index methodology

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