2007 Legatum Prosperity Index™

The 2007 Legatum Prosperity Index combines more than 70 variables into 20 key indicators in order to rank countries, based on the degree to which the actions of their people and governments drive or restrain the creation of well-rounded prosperity.

A report for the Prosperity Index programme

Published 4 Nov 2007

In a world in which many people are becoming richer, we asked if we are also getting happier, more fulfilled, and feeling better about life. In short: are we genuinely more prosperous?

Constructing the Index

The Legatum Prosperity Index is the result of an investigation into the various factors that drive prosperity in different countries. Recent research advances have made it possible to compare not only the material wealth but also the life satisfaction of people in countries worldwide. Accordingly, we have defined national prosperity as the wellrounded combination of both of these factors.

The Index is based on the statistical testing of 40 years of data on economic growth and life satisfaction survey results for more than 50 countries worldwide.

The 2007 Legatum Prosperity Index combines more than 70 variables into 20 key indicators in order to rank countries, based on the degree to which the actions of their people and governments drive or restrain the creation of well-rounded prosperity.

In this first annual edition of the Legatum Prosperity Index, we have limited the coverage to 50 countries for which high-quality data on the drivers of both material wealth and life satisfaction are available.

Key Findings

The key drivers of increasing material wealth, via sustained long-term economic growth, are, from most important to least,

  1. Growth in Invested Capital
  2. Low Dependence on Foreign Aid
  3. High Levels of Education
  4. Good Governance
  5. Low Dependence on Commodity Exports
  6. Low Costs of Bureaucracy
  7. Economic Openness

The key drivers of high levels of life satisfaction are, from most important to least,

  1.  Freedom of Choice
  2. Good Health
  3. Equality of Opportunity
  4. Strong Religious Faith
  5. High Levels of Income
  6. Favourable Climate
  7. Political Rights and Civil Liberties
  8. Low Unemployment Rates
  9. Low Divorce Rates

We conducted separate tests on rich countries (mainly Europe, North America, and Japan). In rich countries, two additional important drivers of increasing material wealth re (1) Competitive Domestic Markets and (2) the Commercialisation of Innovative

New Technologies. Two additional important drivers of life satisfaction in rich countries are (1) Vibrant Community Life and (2) Ample Hours of Leisure Time.

There is a three-way tie between Norway, Sweden, and the United States for the top spot in the Index, although each country leads for different reasons.

Through responsible management of its natural resource wealth, Norway has achieved rapid economic growth as well as excellent social conditions. Sweden may perform less well economically, but has world-leading scores on the most important social indicators including political and civil liberties, community life, health, leisure time, and equality of opportunity. The United States has respectable scores in most areas, and is exceptional in the degree to which its citizens maintain strong religious faith and report that they feel secure in their ability to make free choices and control their own lives. Both of these are factors that, other things being equal, correlate strongly with life satisfaction.

The top ten countries in the Index are wealthy and democratic, and are mostly European, with some representation for Asia-Pacific (New Zealand) and North America (the United States and Canada).

The full rankings of all Index countries, together with country profiles and the full Prosperity Index Report, are available online at www.prosperity.com. Visitors to the interactive site may also view and manipulate the data and create custom reports.

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2007 Legatum Prosperity Index™

Nov 2007

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