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The long run survival of small nations. A dynamic view

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  • Pieretti, Patrice

    (Center for Mathematical Economics, Bielefeld University)

  • Zanaj, Skerdilajda

    (Center for Mathematical Economics, Bielefeld University)

  • Zou, Benteng

    (Center for Mathematical Economics, Bielefeld University)

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.

Suggested Citation

  • Pieretti, Patrice & Zanaj, Skerdilajda & Zou, Benteng, 2011. "The long run survival of small nations. A dynamic view," Center for Mathematical Economics Working Papers 437, Center for Mathematical Economics, Bielefeld University.
    • Handle: RePEc:bie:wpaper:437
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    References listed on IDEAS

    as
    1. Hindriks, Jean & Peralta, Susana & Weber, Shlomo, 2008. "Competing in taxes and investment under fiscal equalization," Journal of Public Economics, Elsevier, vol. 92(12), pages 2392-2402, December.
    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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    1. How can very small economies survive?
      by Economic Logician in Economic Logic on 2010-08-25 19:57:00

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