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Small states, small problems?

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Author Info

  • Easterly, William
  • Kraay, Aart

Abstract

Small states have attracted a good deal of research. The authors test whether micro-states are any different from other states in income, growth, and volatility. They find that, controlling for location, smaller states are actually richer than other states in per capita GDP. This income advantage largely reflects a productivity advantage--evidence against the idea that micro-states are unable to exploit increasing rates of return to scale. Small states do not have different per capita growth rates, with or without controls. Their annual growth rates are more volatile, partly because of their greater volatility in responses to terms-of-trade shocks--to which they are exposed because of their greater openness pays off positively in growth. The authors do recommend that small states diversify their risk by opening up more to international capital markets, although the benefits of doing so are still unresolved in the literature. In general, they conclude, small states are nor different from large states and should receive the same policy advice large states do.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2139.

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Date of creation: 30 Jun 1999
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Handle: RePEc:wbk:wbrwps:2139

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Related research

Keywords: Economic Theory&Research; Environmental Economics&Policies; Fiscal&Monetary Policy; Public Health Promotion; Economic Conditions and Volatility; Inequality; Achieving Shared Growth; Economic Theory&Research; Environmental Economics&Policies; Governance Indicators;

References

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  3. Streeten, Paul, 1993. "The special problems of small countries," World Development, Elsevier, vol. 21(2), pages 197-202, February.
  4. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  5. Norman Loayza & Paul Cashin, 1995. "Paradise Lost? Growth, Convergence and Migration in the South Pacific," IMF Working Papers 95/28, International Monetary Fund.
  6. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  7. Farrugia, Charles, 1993. "The special working environment of senior administrators in small states," World Development, Elsevier, vol. 21(2), pages 221-226, February.
  8. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
  9. Milner, Chris & Westaway, Tony, 1993. "Country size and the medium-term growth process: Some cross-country evidence," World Development, Elsevier, vol. 21(2), pages 203-211, February.
  10. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
  11. 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.
  12. Lewis, Karen K, 1996. "What Can Explain the Apparent Lack of International Consumption Risk Sharing?," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 267-97, April.
  13. Briguglio, Lino, 1995. "Small island developing states and their economic vulnerabilities," World Development, Elsevier, vol. 23(9), pages 1615-1632, September.
  14. Srinivasan, T N, 1986. "The Costs and Benefits of Being a Small, Remote, Island, Landlocked, or Ministate Economy," World Bank Research Observer, World Bank Group, vol. 1(2), pages 205-18, July.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Small does matter
    by Brian Ashcroft in Scottish Economy Watch on 2012-06-09 10:28:07
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Teuea Toatu, 2002. "Unravelling the Pacific Paradox," International and Development Economics Working Papers idec02-2, International and Development Economics.
  2. Beine, Michel & Docquier, Frédéric & Schiff, Maurice, 2008. "Brain Drain and its Determinants: A Major Issue for Small States," IZA Discussion Papers 3398, Institute for the Study of Labor (IZA).
  3. Siroën, Jean-Marc, . "Gouvernance, biens publics et globalisation," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/6068, Université Paris-Dauphine.
  4. Klinger, Bailey & Lederman, Daniel, 2010. "Export discoveries, diversification and barriers to entry," Policy Research Working Paper Series 5366, The World Bank.
  5. Holden, Paul & Holden, Sarah & Malcolm, Bale, 2004. "Swimming Against the Tide," MPRA Paper 4207, University Library of Munich, Germany.
  6. Montalbano, Pierluigi & Federici, Alessandro & Triulzi, Umberto & Pietrobelli, Carlo, 2005. "Trade Openness and Vulnerability in Central and Eastern Europe," Working Papers RP2005/43, World Institute for Development Economic Research (UNU-WIDER).
  7. Liou, F. M. & Ding, C. G., 2002. "Subgrouping Small States Based on Socioeconomic Characteristics," World Development, Elsevier, vol. 30(7), pages 1289-1306, July.
  8. Calderon, Cesar & Loayza, Norman & Serven, Luis, 2000. "External sustainability : a stock equilibrium perspective," Policy Research Working Paper Series 2281, The World Bank.
  9. César Calderón & Norman Loayza & Luis Servén, 2001. "International Portfolio Diversification: The Role of Risk and Return," Working Papers Central Bank of Chile 94, Central Bank of Chile.
  10. Winters, L. Alan, 2000. "Trade, Trade Policy and Poverty: What Are The Links?," CEPR Discussion Papers 2382, C.E.P.R. Discussion Papers.
  11. Jacinto Brito González, 2004. "Conocimiento, geografía e instituciones: Una aproximación a la problemática del crecimiento en el archipiélago canario," Documentos de trabajo conjunto ULL-ULPGC 2004-03, Facultad de Ciencias Económicas de la ULPGC.
  12. Calderon, Cesar & Loayza, Norman & Serven, Luis, 2003. "Do capital flows respond to risk and return?," Policy Research Working Paper Series 3059, The World Bank.

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