What is the economic system of Estonia? The economy of Estonia is based on a mixed economy. The country’s economic system combines elements of a market economy and a planned economy.
In Estonia, the economy comprises a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of certain goods and services. No country is purely capitalist or purely communist.
What do the freedom indexes tell about the economic system of Estonia?
To determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2022 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, Estonia is ranked 7th globally and 4th in Europe indicating that the country has a free economy.
In a similar way, the 2022 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections.
Estonia gets a score of 94/100, which qualifies it as Free. Estonia is a country where the government does not control what people do for political reasons, and people have the freedom to choose (what, how much, and how to produce, whether to buy or not, selling price, etc.)
The Link Between Public Sector Employment and the Economic System of Estonia
An indicator of the extent to which the State is involved in the economy is the number of public sector employees. In Estonia, according to ILOSTAT, the number of public sector employees as a percentage of the total workforce is 23.8% (2019). In the country’s mixed economy, the number of public sector employees as a percentage of the total workforce varies based on the specific policies and practices adopted by the State.
Some economic activities are left to the private sector while others are under government control. The bigger the public sector the closer is the economy to being a command economy.
What does the biggest company in Estonia say about the country’s economic system
The biggest company in Estonia should also be looked at, as well as whether it is a state-owned or private company. In this case, The Tallink Group from Estonia is a private company with multiple shareholders. It is a major player in the transportation and tourism industry in the Baltic region.
The historical factors that have influenced the economic system of Estonia
The mixed economy system of Estonia in the last century was caused by a combination of factors, including the collapse of the Soviet Union, the adoption of a market-based economy, and the influx of foreign investment. These factors have allowed Estonia to develop a strong and diverse mixed economy, with a focus on technology, innovation, and entrepreneurship.