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Small but beautiful? Economic impacts of the size of nations in the European Union

  • König, Jörg
  • Ohr, Renate

This paper highlights the economic meaning of the size of the state for members of the European Union, thereby making the economic success of EU states statistically tangible. Firstly, we show in descriptive illustrations that the theoretically expected characteristics of small countries clearly apply to the current EU states. From the theoretical perspective, only the bivariate relationship between the population size and the economic growth initially depicts an unexpected sign. However, the econometric analysis performed on our panel data set confirms the assumption that this relationship is strongly influenced by factors other than population size, such as the duration of EU membership, the level of economic development (transformation process) and the increased development potential provided by EU funds. When subtracting these effects through appropriate statistical methods, there is an overall significant positive dependence of economic growth on the size of the state.

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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 128.

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Date of creation: 2011
Date of revision:
Handle: RePEc:zbw:cegedp:128
Contact details of provider: Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
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  1. repec:lan:wpaper:899 is not listed on IDEAS
  2. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  3. Harvey W. Armstrong & Robert Read, 1998. "Trade and Growth in Small States: The Impact of Global Trade Liberalisation," The World Economy, Wiley Blackwell, vol. 21(4), pages 563-585, 06.
  4. Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
  5. Briguglio, Lino Pascal, 1998. "Small Country Size and Returns to Scale in Manufacturing," World Development, Elsevier, vol. 26(3), pages 507-515, March.
  6. Furceri, Davide & Karras, Georgios, 2007. "Country size and business cycle volatility: Scale really matters," Journal of the Japanese and International Economies, Elsevier, vol. 21(4), pages 424-434, December.
  7. V. N. Balasubramanyam & M. Salisu & David Sapsford, 1999. "Foreign direct investment as an engine of growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(1), pages 27-40.
  8. Andrew K. Rose, 2006. "Size Really Doesn't Matter: In Search of a National Scale Effect," NBER Working Papers 12191, National Bureau of Economic Research, Inc.
  9. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September.
  10. Brems, Hans, 1970. "A Growth Model of International Direct Investment," American Economic Review, American Economic Association, vol. 60(3), pages 320-31, June.
  11. 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.
  12. repec:lan:wpaper:898 is not listed on IDEAS
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