Economy free of state ownership vs. Liberal democracy
Holds up after adjusting for income
Across 168 countries, Economy free of state ownership and Liberal democracy rise and fall together at r = +0.63 (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 = +0.65, q = 0.0093, allowing for the many pairs tested).
Comparing countries across the middle half of liberal democracy, 0.127 to 0.615 points, economy free of state ownership is 1.21 points higher at the top of that range than the bottom. Comparing only countries with similar national income, the gap is 1.43 points.
Link before adjusting (r)+0.634p = 2.8e-20 · 168 countries
After adjusting for national income+0.647p = 3.8e-21 · likely range [+0.55, +0.73]
p, allowing for regions4.1e-5standard error 0.061 · 7 regions
Check for luck (q)0.009across 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
Liberal democracy · index (0-1)link with income +0.52 · moderate
“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 | +0.634 | 2.8e-20 | 168 |
| By rank (Spearman), not adjusted | +0.633 | 3.2e-20 | 168 |
| Standard (Pearson), adjusted for national income | +0.647 | 3.8e-21 | 168 |
| By rank (Spearman), adjusted for national income | +0.623 | 2.7e-19 | 168 |
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 168 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: -0.013 (a minus sign means it grew).
How solid is it?
Leaving out one country at a time, r ranges from +0.634 (without QAT) to +0.657 (without KHM). 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: QAT (-0.012).
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 | +0.54 | |
| Europe & Central Asia | 49 | +0.59 | |
| Latin America & Caribbean | 23 | +0.41 | |
| Middle East, North Africa, Afghanistan & Pakistan | 21 | +0.71 | |
| Sub-Saharan Africa | 46 | +0.57 |
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 | 56 | +0.44 | |
| Middle third | 56 | +0.67 | |
| Richest third | 56 | +0.76 |
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 | +0.55 | |
| Muslims | 48 | +0.54 |
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 | +0.18 | |
| Never a European colony | 21 | +0.84 | |
| Spain | 19 | +0.65 | |
| United Kingdom | 49 | +0.66 |
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 | +0.51 | |
| No strong official ideology | 116 | +0.49 |
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 | +0.43 | |
| No parties banned | 121 | +0.42 |
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 = +0.651 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.
Loading…
Over time, within countries
Everything above compares countries with each other at one moment. This section compares each country only with itself over 36years. So a link here can’t come from anything about a country that stays the same, such as its history, geography, institutions or culture.
The link also shows up within countries over time (r = +0.327). It holds even when looking only at changes from one year to the next (r = +0.141). This is the strongest kind of evidence available here: it holds when each country is compared only with itself, and it is not just a product of shared trends.
Across countries (adjusted)+0.647for comparison
Within countries+0.400each country vs itself
…and vs the same year elsewhere+0.327q = 0.000 · 175 countries
Year-on-year changes+0.141q = 0.000
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.
6,231 country-years (one country in one year), 175 countries, 1990–2025, about 36 years each on average. Share of the variation that happens within countries over time: 9% for Economy free of state ownership, 15% for Liberal democracy. 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): +0.327. 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 (0-1) | Years | |
|---|---|---|---|
| Japan JPN | 2.98 | 0.734 | 2025 |
| Switzerland CHE | 2.22 | 0.843 | 2025 |
| Peru PER | 2.21 | 0.506 | 2025 |
| Latvia LVA | 2.17 | 0.751 | 2025 |
| Luxembourg LUX | 2.12 | 0.777 | 2025 |
| Guatemala GTM | 2.12 | 0.523 | 2025 |
| Lithuania LTU | 2.08 | 0.712 | 2025 |
| Belgium BEL | 2.08 | 0.794 | 2025 |
| Germany DEU | 1.96 | 0.782 | 2025 |
| Czechia CZE | 1.91 | 0.794 | 2025 |
| Cyprus CYP | 1.85 | 0.664 | 2025 |
| Benin BEN | 1.81 | 0.323 | 2025 |
| Somalia, Fed. Rep. SOM | 1.81 | 0.128 | 2025 |
| Chile CHL | 1.76 | 0.781 | 2025 |
| United States USA | 1.75 | 0.571 | 2025 |
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.
Coppedge, M. et al., V-Dem Dataset, Varieties of Democracy (V-Dem) Project
Sources
Economy free of state ownership
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.
Liberal democracy
Liberal democracy index
V-Dem Institute, University of Gothenburg · via Our World in Data · CC BY-SA 4.0 · updated annual
Electoral democracy plus limits on the head of government, independent courts and protected personal freedoms. It contains the electoral democracy index as a part, so the two are built from the same numbers and bound to match.
How this was computed
Data used: most recent value in 2010-2025; values come from 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 Liberal democracy
This page shows that two measures go together. It does not show that Economy free of state ownership changes Liberal democracy, or the reverse. These figures also describe countries, not individual people. See the ecological fallacy.
More links with Economy free of state ownership or Liberal democracy
- Economy free of state ownership vs Freedom of expression before +0.74 → after adjusting +0.73
- Economy free of state ownership vs Political civil liberties before +0.74 → after adjusting +0.73
- Liberal democracy vs Rule of law before +0.81 → after adjusting +0.73
- Liberal democracy vs Women's political empowerment before +0.78 → after adjusting +0.72
- Economy free of state ownership vs Freedom of association before +0.72 → after adjusting +0.71
- Economy free of state ownership vs Governance score before +0.67 → after adjusting +0.69
- Liberal democracy vs Political corruption before -0.78 → after adjusting -0.68
- Economy free of state ownership vs Independent opposition before +0.69 → after adjusting +0.68