The Impact of economic freedom on the attraction of foreign direct investment in the Baltics

In our increasingly globalised economy, global competitiveness of countries and means to measure are also growing in significance. One the strongest motivating forces behind competitiveness is the ability to improve chances for attracting foreign direct investment (FDI), which in turn is a very substantial factor for increasing prosperity. One of the ways to measure it is by comparing the extent of economic freedom that countries have, which, as surveys show, can also largely explain differences in living standards across the world. The purpose of this article was to examine the effect of economic freedom on the attraction of FDI in the Baltics. By using the Index of Economic Freedom with its 10 components, and comparing the historic scores of economic freedom in the economically homogenous Baltic states with their attracted foreign FDI over the years, it becomes evident that economic freedom has had an impact on promotion of these investments, which can also be partly explained by differences in the enforcement of intellectual property rights