THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Luxembourg

Ranked 12th of 149

At a glance

Ranks

12 th on the Legatum
Prosperity Index™

9th
29th
8th
27th
1st
2nd
1st
23rd
3rd

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Luxembourg performs best on Personal Freedom and Health and scores lowest on the Business Environment sub-index.

Visit our Rankings table to see how Luxembourg compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Luxembourg is the second richest country by GDP per capita after Qatar and, unlike Qatar, delivers a prosperity surplus given its impressive performance across the sub-indices of the Prosperity Index. Nevertheless, it is notable that Luxembourg has the lowest prosperity surplus in the global top 15. The Scandinavian countries, Germany, the UK, and Canada all have a prosperity surplus nearly three times larger than Luxembourg with a considerably lower GDP per capita.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Luxembourg has a stable, high-income market economy dominated by the services, especially banking and financial, industry. It is the second largest investment fund centre after the United States and the most important private banking centre in the Eurozone. Nevertheless, it also has a diversified industrial sector and performs better than average in the exports diversity index in comparison to its OECD peers. Unemployment is low, though this has gone up slightly to 6.1% since the financial crisis of 2008 and satisfaction with living standards remains high. While Luxembourg’s Economic Quality score has declined slightly after the events of 2008, its stable economic performance sees the country retain its rank at 9th in the sub-index for the second year running and it is a driver of the country’s prosperity.

Luxembourg ranks 1st in the Health and Personal Freedom sub-indices. In Health, it has ranked in the global top 3 over the past decade. Luxembourg provides its citizens with free, high-quality health services, mainly publicly financed through social health insurance: an average 5.4% of an employee’s gross income is distributed directly into the Caisse de Maladie (public health fund.) It has the lowest morality rate among the EU member states and, at 81.8 years, has the 5th highest life expectancy.

Given that it is the home to one of three EU capitals and is home to a large international community, it is unsurprising that Luxembourg ranks 1st in the Personal Freedom sub-index. As a founding member of the EU, OECD, UN and NATO, Luxembourg’s governments have consistently championed political, economic and social integration. Luxembourg City is the seat of the European Court of Justice and a number of other European institutions. The Schengen Agreement, which paved the way towards freedom of movement within the EU, was signed in Luxembourg where the French-German-Luxembourg borders meet. Its population is extremely diverse, with foreign nationals making up 46.7% of the population. The Prosperity Index record that 87% and 86% of people polled thought their area was a good place to live for ethnic minorities and immigrants, respectively. Luxembourg is also very tolerant towards the LGBT community with 81% of people thinking their area is a good place for lesbian, gay, bi and transgender people. Same-sex marriage was legalised in 2015 and notably, Luxembourg has the first openly gay prime minister.

In the Safety & Security sub-index, Luxembourg ranks 2nds after Singapore: it has moved up by 6 ranks over the past decade and performs well above the OECD average. It has the lowest homicide rate among OECD and EU member states.

There is room for improvement in the Education sub-index where Luxembourg scores below the OECD average, ranking 27th. It has seen little movement over the past decade and its educational quality (PISA) score sits just below the OECD Average. A 2014 OECD report also showed that Luxembourg secondary students had the highest fail rate and repeaters among OECD nations. However, there is a good vocational education system in place with 31.6% of the working age population having attended secondary vocational school, above the OECD and EU averages.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.