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The Long Run Survival of Small Nations: A Dynamic View

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Author Info

  • Patrice Pieretti

    (CREA, Université du Luxembourg)

  • Skerdilajda Zanaj

    (CREA, Université du Luxembourg)

  • Benteng Zou

    ()
    (CREA, Université du Luxembourg)

Abstract

In this paper, we analyze the dynamics of a very small economy which tries to attract foreign investments. For that purpose, we model the intertemporal behavior of a small jurisdiction using taxes and attractive public infrastructures as policy instruments, for given policy choices of the rest of the world. Applying Pontryagin’s maximum principle, we then characterize the potential steady states which are attainable. These results give some insights into the policy behavior that may guarantee the long run survival of very small economies.

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File URL: http://www.imw.uni-bielefeld.de/papers/files/imw-wp-437.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Bielefeld University, Center for Mathematical Economics in its series Working Papers with number 437.

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Length: 24 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:bie:wpaper:437

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Related research

Keywords: public goods competition; spatial competition; foreign direct investments; country size;

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References

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  1. Hindriks, Jean J.G. & Peralta, Susana & Weber, Shlomo, 2007. "Competing in Taxes and Investment under Fiscal Equalization," CEPR Discussion Papers 6431, C.E.P.R. Discussion Papers.
  2. Armstrong, H. & De Kervenoael, R. J. & Li, X. & Read, R., 1998. "A comparison of the economic performance of different micro-states, and between micro-states and larger countries," World Development, Elsevier, vol. 26(4), pages 639-656, April.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. How can very small economies survive?
    by Economic Logician in Economic Logic on 2010-08-25 14:57:00

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