Economy free of state ownership vs. Government effectiveness
Holds up after adjusting for income
Across 169 countries, Economy free of state ownership and Government effectiveness rise and fall together at r = +0.31 (on a scale from −1 to +1, where 0 means no link). It holds up almost unchanged when only countries with similar income (GDP per person) are compared (r = +0.31, q = 0.043, allowing for the many pairs tested).
Comparing countries across the middle half of economy free of state ownership, -0.059 to 1.32 points, government effectiveness is better by 0.402 points at the top of that range than the bottom. Comparing only countries with similar national income, the gap is 0.228 points.
Link before adjusting (r)+0.308p = 4.6e-5 · 169 countries
After adjusting for national income+0.314p = 3.3e-5 · likely range [+0.17, +0.44]
p, allowing for regions0.004standard error 0.070 · 7 regions
Check for luck (q)0.043across 17,292 pairs
How to read these.r runs from −1 (one goes up as the other goes down) to +1 (they rise together), and 0 means no link. Adjusting for national income means comparing countries with the same GDP per person, so differences in wealth can’t explain the link. Income is used in percentage terms, since an extra $1,000 means more to a poor country than to a rich one. p is how likely a link this strong would be if there were really none. Below 0.05 means it is unlikely to be chance. Very small values are written in short form: 1.1e-32 means a decimal point followed by 31 zeros and then 11, so very close to zero. The likely range is where the true figure probably lies, and a range that crosses zero means the link could easily be chance. Countries in the same region tend to resemble each other, so the third figure allows for that, which gives a fairer p. The standard error is the typical size of the error in r. Finally, testing this many pairs means some will look strong by luck alone. A q below 0.05 means this link is unlikely to be one of those.
Economy free of state ownership · score (higher = less state-owned)link with income +0.21 · independent
Government effectiveness · index (approx. -2.5 to 2.5)link with income +0.85 · proxy
“Link with income” is how closely each measure tracks GDP per person across countries, from −1 to +1.
Every country as a dot
best-fit line line after adjusting
Four ways to measure the link
Method
r
p
Countries
Standard (Pearson), not adjusted
+0.308
4.6e-5
169
By rank (Spearman), not adjusted
+0.303
6.1e-5
169
Standard (Pearson), adjusted for national income
+0.314
3.3e-5
169
By rank (Spearman), adjusted for national income
+0.248
0.001
169
The rank version uses only each country’s place in line, from lowest to highest, so a few extreme countries count for less. The adjusted and unadjusted versions use the same 169 countries: those that report both measures and GDP per person. So the gap between them comes from the adjustment, not from a change in which countries are counted. Drop in the size of r after adjusting: -0.006 (a minus sign means it grew).
How solid is it?
Leaving out one country at a time, r ranges from +0.290 (without TKM) to +0.353 (without RWA). The bar above shows that range on a scale from −1 to +1, with the solid line at the full result. The single country that moves r most: RWA (+0.039).
Within each region
Countries are not separate, unrelated cases, and neighbors share a lot. A link that holds inside each region is far more believable than one that shows up only when comparing regions.
n
r
East Asia & Pacific
21
+0.59
Europe & Central Asia
49
+0.30
Latin America & Caribbean
23
+0.09
Middle East, North Africa, Afghanistan & Pakistan
22
+0.31
Sub-Saharan Africa
46
+0.17
By income third
If the link shows up only in the richest third of countries, it is a feature of rich countries, not a general pattern.
n
r
Poorest third
57
+0.11
Middle third
56
+0.27
Richest third
56
+0.47
By largest religious group
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
Christians
99
+0.32
Muslims
49
+0.13
By last European coloniser
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
France
25
-0.07
Never a European colony
21
+0.41
Spain
19
+0.36
United Kingdom
49
+0.43
By official ideology
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
Nationalist
25
+0.30
No strong official ideology
117
+0.26
By party system
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
n
r
A few parties banned
26
+0.15
No parties banned
122
+0.21
Without outliers (countries far outside the middle half of countries on either measure, by more than one and a half times the width of that middle half): r = +0.305 after dropping 1 countries.
Two series, one country
Both measures over the years for one country you pick. The two charts are stacked so they share only the years along the bottom.
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Over time, within countries
Everything above compares countries with each other at one moment. This section compares each country only with itself over 29years. So a link here can’t come from anything about a country that stays the same, such as its history, geography, institutions or culture.
Within countries over time, there is no link that is clearly more than chance (r = +0.096, comparing each country only with itself over the years, and each year only with the same year elsewhere). Whatever the cross-country picture shows, countries whose economy free of state ownership moved did not tend to see their government effectiveness move with it.
Across countries (adjusted)+0.314for comparison
Within countries+0.105each country vs itself
…and vs the same year elsewhere+0.096q = 0.148 · 176 countries
Year-on-year changes+0.017q = 0.584
Read with care.
Almost all of this indicator's variation is between countries, not within them, so the within-country estimate rests on a small part of the data.
4,534 country-years (one country in one year), 176 countries, 1996–2024, about 26 years each on average. Share of the variation that happens within countries over time: 7% for Economy free of state ownership, 6% for Government effectiveness. The margins of error allow for each country appearing many times, and for each year’s value being close to the year before.
Year-to-year changes are a cautious test, not a final answer. Looking only at changes from one year to the next removes each country’s own trends. But it also makes measurement mistakes louder, which pulls the results toward zero. A near-zero result here is weak evidence of no link, not proof.
With one measure years behind the other
Same year (lag 0): +0.096. A peak away from zero does not show which comes first. These series change slowly — this year’s value is close to last year’s. That makes the curve smooth and nearly symmetric, whatever produced the data. Even a sharp peak at one lag (a gap of some years) would not prove that one measure changes the other.
The data
score (higher = less state-owned)
index (approx. -2.5 to 2.5)
Years
Japan JPN
2.98
2.09
2025, 2024
Switzerland CHE
2.22
1.84
2025, 2024
Peru PER
2.21
-0.2
2025, 2024
Latvia LVA
2.17
0.743
2025, 2024
Luxembourg LUX
2.12
2.04
2025, 2024
Guatemala GTM
2.12
-0.909
2025, 2024
Lithuania LTU
2.08
1.2
2025, 2024
Belgium BEL
2.08
1.19
2025, 2024
Germany DEU
1.96
1.55
2025, 2024
West Bank and Gaza PSE
1.94
-1.1
2025, 2024
Czechia CZE
1.91
1.18
2025, 2024
Cyprus CYP
1.85
0.87
2025, 2024
Benin BEN
1.81
-0.185
2025, 2024
Somalia, Fed. Rep. SOM
1.81
-1.95
2025, 2024
Chile CHL
1.76
0.964
2025, 2024
Coppedge, M. et al., V-Dem Dataset v16, Varieties of Democracy (V-Dem) Project; Lindberg, S. I. et al., Varieties of Party Identity and Organization (V-Party) Dataset. Read from the V-Dem Institute's vdemdata package. Kaufmann, D. and A. Kraay, Worldwide Governance Indicators, World Bank
State ownership of the economy (higher = less owned by the state)
V-Dem Institute, University of Gothenburg · CC BY-SA 4.0 · updated annual (V-Dem); V-Party per election, to 2019
Does the state own or directly control the important parts of the economy? Experts answer from 0 ("virtually all valuable capital belongs to the state") to 4 ("very little valuable capital belongs to the state"), and V-Dem turns their answers into a score that runs from about -4 to +4. So a low score means a mostly state-run economy, as in North Korea or Eritrea, and a high score a mostly private one. It is about ownership and control, not taxes or welfare: a country can tax and spend a great deal while the state owns almost nothing. Today it lines up only weakly with how rich a country is. Oil states such as Saudi Arabia, Qatar and Kuwait are rich while the state owns much of the economy, and some of the poorest countries, such as Somalia, Haiti and the Central African Republic, have little state ownership. The link with income was stronger in the 1960s and has weakened every decade since. Within Europe and Central Asia, where former communist countries sold off state firms, it is still strong. No "better" direction is set: how much the state should own is a political question.
Data used: most recent value in 2010-2025; values come from 2024–2025. To adjust for income, each measure is first predicted from GDP per person (in percentage terms, on a log scale) with a straight-line fit. Only what is left over is then compared. This is called a partial correlation. The line is drawn the standard way (ordinary least squares), which picks the line that comes closest to all the countries at once. The error margins allow for countries in the same region resembling each other, using 7 World Bank regions. The q-value corrects for testing all 17,292 pairs at once, using the Benjamini–Hochberg method. Underlying data last updated V-Dem v16; V-Party v2. How the country data works · explore Economy free of state ownership and Government effectiveness
This page shows that two measures go together. It does not show that Economy free of state ownership changes Government effectiveness, or the reverse. These figures also describe countries, not individual people. See the ecological fallacy.
More links with Economy free of state ownership or Government effectiveness