This document explains the categories, metrics and methodology used in Newsweek's ranking of the world's best countries, and associated interactive infographic.
Population and Income Groups
Income groups are divided according to 2009 gross national income (GNI) and GNI per capita, calculated using the World Bank Atlas method.
Size groups are based on population with large being greater than 50 million, medium being 20 to 50 million and small being less than 20 million.
Categories and Metrics
Combined universal score on TIMSS and/ or PISA tests using Eric Hanushek's normalization methodology. For schools that do not administer these tests, an achievement score was imputed by doing a regression of literacy rate (CIA World Factbook) and average years of schooling against the universal score. ,
Quick Rationale: Captures overall efficacy of system and differentiates developing countries. Measures education achievement.
Note: The data originally published in our interactive did not reflect an adjustment made to our education index meant to offset a bias towards more developed nations and account for the great strides made by certain developing nations in recent years. As part of this change, Finland’s education score rose to 102 from 100 to account for the country’s perfect scores on each of the education metrics.
Healthy life expectancy at birth (years)
Average number of years that a person can expect to live in full health by taking into account years lived in less than full health due to disease and/or injury (World Health Organization).
Quick rationale: Captures overall efficacy of health system.
3. Quality of Life
Gini coefficient - degree of inequality in family income (UNDP).
Gender Gap - degree of economic, health, education and political inequality between the sexes (World Economic Forum, Gender Gap).
Quick rationale: Measures the level of social, economic and gender inequality.
Extreme poverty 
Definition (source): The percentage of the population living on less than $2/day at 2005 international prices (World Bank).
Quick rationale: Differentiates quality of life in developing countries.
Standard of living
Definition (source): Consumption per capita  - private consumption divided by population (Global Insight).
Quick rationale: Differentiates quality of life in developed countries.
Physical environment 
Definition (source): Homicide rate - Homicides per 100,000 population (UN Office on Drugs and Crime).
Definition (source): Environmental Health - air/water pollution and environmental burden of disease on humans (Yale’s Environmental Performance Index).
Quick rationale: Measures physical security and environmental impact on humans.
Definition (source): Unemployment rate - percentage of labor force without jobs (CIA World Fact Book; EIU).
Quick rationale: Measures rate of joblessness; could be correlated with depression.
4. Economic Dynamism
Growth in GDP/capita : GDP per Capita at PPP multiplied by the average of the GDP per Capita growth rate over the last ten years and the GDP per Capita growth rate over the next ten years (CIA World Fact Book, Global Insight). Expressed in incremental US$ of growth per person.
Quick rationale: Applauds the historic growth of the developed countries while capturing the forward momentum of developing countries. Expresses growth not as a percentage, but as increase in US$ per person.
Services  and Manufacturing as percentage of GDP (World Bank, Global Insight).
Quick rationale: Awards countries that are not heavily reliant upon agriculture and/or natural resources.
World Economic Forum’s Innovation Index: Based on capacity for innovation, quality of scientific research, company spending on R & D, university-industry collaboration in R D, government procurement of advanced technology products, availability of scientists and engineers, utility patents, intellectual property protection (WEF Global Competitiveness Report).
Quick rationale: Evaluates a country’s willingness to invest in knowledge-building efforts.
Business vitality 
Ease of doing business: ranks economies on regulatory environment’s conduciveness to business operation. The index ranks the simple average of the country's percentile rankings on 10 topics covered in “Doing Business 2007: How to reform”; ranking on each topic is the simple average of the percentile rankings on its component indicators (World Bank).
Bankruptcy: number of years from the filing for insolvency in court until the resolution of distressed assets (World Bank).
Time to start a new business: number of calendar days needed to complete the procedures to legally operate a business (World Bank).
Quick rationale: Captures the openness of the market to new business entrant.
Stock market capitalization
Stock market capitalization as percentage of GDP: equity market capitalization of domestic companies listed on domestic and international exchanges as a percentage of GDP. (S&P; McKinsey Global Institute).
Quick rationale: Captures the size and breadth of a country’s corporate sector. (Variable excluded for the few countries without a domestic stock exchange).
5. Political Environment
Freedom House rating
Based on electoral process, political participation, functioning government, freedom of expression and belief, associational and organizational rights, rule of law, and personal autonomy and individual rights (Freedom House).
Quick rationale: Assesses the perceived level of democratic freedom in a country.
Global Peace Index’s Political Participation rating
Qualitative assessment of voter participation/turn-out for national elections, citizens engagement with politics (EIU Democracy Index).
Quick rationale: Evaluates a country’s participation in political processes.
Political Risk Service's Political Stability rating
Independent rating of political risk faced by governments, corporations and investors (Political Risk Services) .
Quick rationale: Measures the relative risk faced by governments, businesses and individuals due to political decisions and actions.
- For exceptions, see CIA World Fact book.
- Hanushek and Woesmann, “The High Cost of Low Educational Performance,” OECD, 2010; countries not participating in international testing were assigned the lowest score.
- Gini and Gender Gap index are equally weighted to measure inequality metric; Global Peace Index used for missing Gina data.
- Rich countries are not measured on this statistic, thus, for these countries a rate of 1.9% was assumed.
- Imputed for Cuba and El Salvador based on GDP.
- Homicide rate and Environmental health are equally weighted tomeasure physical environment metric.
- For the index, the max was set equal to Singapore. Those with GDP/capita higher than Singapore received the highest score on the index.
- Qatar assumed to be equal to the United Arab Emirates. Israel assumed to be equal to Syria.
- Business vitality measured by equal weighting of ease of doingbusiness, bankruptcy and time to start a new business.
Methodology for Creating Index
Raw data for 100 countries were normalized on a 1-100 scale (except in Education, see note above) according to the following:
99 (country score - sample minimum) +1 / (sample maximum - sample minimum)
Sample min/max are lowest and highest country scores (with adjustment for outliers on GDP as indicated).
Each individual metric was given equal weighting within each of the five categories with some metrics being comprised of 2-3 submetrics that were also weighted equally.
Each category was weighted equally to arrive at overall index.
If high value indicates a worse outcome, index is calculated according to:
-99 (country score - sample minimum) / (sample maximum - sample minimum) + 100