THE COSTS AND BENEFITS OF BEING A SMALL, REMOTE, ISLAND, LANDLOCKED, OR MINISTATE ECONOMY

Abstract

Any index of smallness is somewhat arbitrary, but common practice has been to use population and income criteria. Experience suggests that smallness is neither a necessary nor sufficient condition for poor development performance. This paper considers the problems that small economies are most often alleged to face, including absence of economies of scale, vulnerability, remoteness, reduced access to capital markets, problems of macroeconomic policy dependence, and overstatement of real income. The paper concludes that many of the alleged problems of small economies are either not peculiar to small economies or can be addressed through suitable policy measures.