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AD ALTA

JOURNAL OF INTERDISCIPLINARY RESEARCH

ECONOMIC FREEDOM – CLASSIFICATION OF ITS LEVEL AND IMPACT ON THE ECONOMIC
SECURITY

LADISLAV MURA,

MONIKA DAŇOVÁ,

ROMAN

VAVREK,

MARIANA DUBRAVSKÁ

Pan-European University, Faculty of Economics and Business,

Tematínska 10, 851 05 Bratislava, Slovakia

Faculty of Management, Prešov University in Prešov,

Konštantínova ul. 16, 080 01 Prešov, Slovakia
email:

ladislav.mura@gmail.com,

monika.danova@unipo.sk,

roman.vavrek@unipo.sk,

mariana.dubravska@unipo.sk

Scientific Paper was elaborated within the framework of the projects KEGA
001UCM-4/2016, KEGA 035PU-4/2016 and VEGA 1/0139/16.

Abstract: The published material focuses on the correlation between the economic
freedom and economic growth, incuding other factors as well. The characteristics,
number and importance of these factors are different by various authors. Different
findings are the result of the multi-factor structure of the economic freedom indicator,
as well as the multicollinearity of economic freedom factors. Various methods of the
economic freedom evaluation are analysed in this article, as well as the generalization
of relationship between the Index of Economic Freedom and indicators of the
economic independence and development. According to the results, there are
differences between the tightness of the assessed economic variables and the Index of
Economic Freedom. Relationship between the development of the EFW index and
public debt, tax burden, export and unemployment has been detected.

Keywords: economic freedom, economic security, economic security factors,
macroeconomic characteristics.

1 Introduction

An effort to define the economic freedom and to determine the
variable that has a direct impact on the level of economic
freedom is a part of this finding. We were trying to answer the
question how to ensure conditions for the economic security.

The answer is reflecting the solution for the issue discussed:
Which type of economic entity should be considered to be a
reference object? Which risks are important from the perspective
of the economic security? To solve a problem means to define
the conditions of the security or define its threats?

The current approach to the issue considers the socio-economic
system as a decisive reference object. Economic security
determines the capacity of self-development, the presence of
institutional conditions and guarantees and the autonomy of the
country without endangering relations with the external
environment. Economic freedom is considered to be the main
factor of the economic security. Freedom of decision making,
competitiveness and protection of personal rights and property
are identified as the main components of the economic freedom.
Freedom of decision making is related to sufficient sources.

This paper is based on the assumption that the level of the
economic freedom in the country may have a significant
influence on the economic security and the economic security of
residents. The main objective of this paper is to confirm the
existence and character of the relationship between the values of
the Index of Economic Freedom and indicators characterising
the source of the economic system, its stability and
independence.

Historically, the security expresses to the ability of the state to
secure its autonomy and stability. The issue has been a subject of
interest in ancient times. Aristotle, Platon, Cicero and Xenophon
have analysed the positive impact of peace to cumulate welfare
as a source of socio-economic growth. Their philosophical
reflections discuss the deterioration of the country's economic
potential because of the use of resources for war purposes.

Solution for security on the level of socio-economic system
came later. According to European mercantilists, security is
closely connected with the establishment of conditions for
economic growth. The ability of a country to accumulate
financial wealth is referred to as a prerequisite for growth and
development. Problem solution is essential to identify tools that

ensure economic efficiency, as well as tools providing financial
wealth for the country.

Economic security is considered to be a basic condition of
military, political and global security. Similarly, defining
conditions appropriate for development and autonomy of the
economic system is a subject of liberal interests.

According to Smith (2001) and Švec (2011), economic security
is determined by stable markets and free decision making ability
of the individuals on the markets.

Security relates to the interests of business entities. According to
utopians, economic security of the market can be achieved by
ensuring economic security of the individual. The possibility of
developing the economic system is based on the ability to
accumulate capital. Similarly, the differences between the
economic interests of the individual and the state are identified
by Freeman (2003), Dudáš and Dudášová (2016).

He refuses to accept the positive impact of prioritization of state
interests in relation to economic security of both reference
subjects. The impact of the interventionist policy on functionig
of the economic system and its entities is also described by other
authors (Friedman, 1992; Lawson 2006; Bilan et al., 2016).

The current approach to solution of this issue is represented by
Buzan (2008). He based his assumptions on the fact that security
risks are from different spheres (he distinguishes political,
economic, social and environmental sectors). He relates the
economic security of the country with an ability to develop the
economic system of the country smoothly. He considers this
ability as a result of internal development of the economic
system, as well as its level of international dependence (Grancay,
2015). Moran (1990, 1991), Koraus et al. (2015), Kapstein
(1991)

and Ključnikov (2016) require to analyse the impact of

trade, financial and monetary integration and define economic
security on transnational level. Many authors (Buzan, 1991;
Buzan et al 1998; Grizold, 2000; Prezelj, 2008; Špirková et al.,
2015) are dealing with the definition of security risks on
regional, national and transnational level (Bicekova et al., 2015).
Their goal is to identify the risks threating the autonomy of the
economic system.

Despite differences between the opinions about the status,
conditions and factors of the economic security, a common
feature can be identified - a demand for economic freedom. Its
main components are defined as personal choice, voluntary
exchange, competition of the markets, protection of individuals
and property, existence of institutions and policies that enable
voluntary exchange and protection of individuals and property.

Index of Economic Freedom by the Heritage Foundation and
Economic Freedom of the World by Fraser Institute are
presented as a reaction to differences in presented opinion. Their
goal is to gain information that enables to compare the level of
economic freedom in countries and to compare annual changes
and trends. Various authors are dealing with this issue. De Haan
a Sturm (2000), Easton a Walker (1997), Korauš (1999),

Dawson (1998), Kotulič et al. (2015), Heckelman (2000)
conducted a research to identify the existence and strength of the
relationship between the economic freedom and some of the
economic characteristics, most often the growth rate of the
economy. They confirmed a relationship between the economic
growth and economic freedom. This result can not be
generalized. Weed a Kämpf (2002) did not confirm this result.
They confirmed the influence the economic freedom has on the
economic growth.

2 Methodology

Practical usefulness of the indicators of economic freedom in
economic policy is verified by verification of the correlation of

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