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Small states, small problems?

Author

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  • 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.

Suggested Citation

  • Easterly, William*Kraay, Aart, 1999. "Small states, small problems?," Policy Research Working Paper Series 2139, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2139
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    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 15:28:07
    2. Independence Fact No. 2
      by Brian Ashcroft in Scottish Economy Watch on 2013-11-20 16:19:37
    3. Independence Fact No. 3
      by Brian Ashcroft in Scottish Economy Watch on 2013-11-21 18:12:19

    Citations

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    Cited by:

    1. Klinger, Bailey & Lederman, Daniel, 2011. "Export discoveries, diversification and barriers to entry," Economic Systems, Elsevier, vol. 35(1), pages 64-83, March.
    2. 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.
    3. repec:dau:papers:123456789/6068 is not listed on IDEAS
    4. Calderon, Cesar & Loayza, Norman & Serven, Luis, 2000. "External sustainability : a stock equilibrium perspective," Policy Research Working Paper Series 2281, The World Bank.
    5. Teuea Toatu, 2002. "Unravelling the Pacific Paradox," International and Development Economics Working Papers idec02-2, International and Development Economics.
    6. Montalbano, Pierluigi & Federici, Alessandro & Triulzi, Umberto & Pietrobelli, Carlo, 2005. "Trade Openness and Vulnerability in Central and Eastern Europe," WIDER Working Paper Series 043, World Institute for Development Economic Research (UNU-WIDER).
    7. Winters, L. Alan, 2000. "Trade, Trade Policy and Poverty: What Are The Links?," CEPR Discussion Papers 2382, C.E.P.R. Discussion Papers.
    8. Daron Djerdjian, 2009. "Economies of Scale, Ideology and Trade Policy," International Economic Journal, Taylor & Francis Journals, vol. 23(1), pages 1-21.
    9. 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).
    10. Liou, F. M. & Ding, C. G., 2002. "Subgrouping Small States Based on Socioeconomic Characteristics," World Development, Elsevier, vol. 30(7), pages 1289-1306, July.
    11. 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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