The economic growth of small states and small economies in regional economic organizations and integrations: similarities and differences

Petar Kurečić,Đana Luša

doi:10.15503/jecs20141.261.284

Abstract

The authors examine the effect of membership of small states in regional economic organizations and integrations on the growth of GDP. The aim is to use cost-benefi t analysis to answer the question of whether small states, and also small economies, achieve greater economic growth through regional economic organizations and integrations than those small states that are not small economies. Small states, as the subjects of research work, have beenchosen precisely because of their size, here defi ned by quantitative criteria, but taking into account that relational criteria are very important for their positioning in international relations, such as greater exposure to external infl uences and their dependence on membership in regional economic organizations and integrations. The GDP of small states, in an attempt to answer the hypothesis, was followed for a period of twenty years. Characteristics thatdepend on regional affi liation of small states, as well as the similarities and differences between small states which are members of the same regional economic organizations/integrations, were also the subject of this paper.

Highlights

The study of small states has always attracted the attention of the literary world due to the connotations tied to them, such as isolation, secrecy, leisurely and luxurious lifestyles, adventure
Small states are more vulnerable to international economic ßuctuations given the openness of their economy, and are dependent on a number of economic activities, which all results in greater volatility of gross domestic product (GDP) compared to large states (Armstrong, & Read, 1998)
As an exception, countries that represent true „economic dwarfs”, i.e., those that do not belong among small states by surface area or population according to the applied criteria, but whose total GDP puts them in the group of small countries, that is, small economies were singled out

Summary

Introductory considerations

The study of small states has always attracted the attention of the literary world due to the connotations tied to them, such as isolation, secrecy, leisurely and luxurious lifestyles, adventure. The author introduces a number of factors affecting the interpretation of growth of small economies: geography (island location, climate, location in relation to other countries, distance from the equator); strategic importance (e.g. location along an important strategic route); degree of vulnerability; political stability (political environment of relative peace); natural resources; openness to international trade in goods and services; economic structure (the strengthening of certain economic sectors such as tourism and Þnancial services); cultural and social coherence (strong sense of community, a greater elasticity of social institutions); independence and endogenous policies (fast and ßexible responses to external shocks and targeted specialization) (Armstrong, & Read, 2000). Small states are more vulnerable to international economic ßuctuations given the openness of their economy, and are dependent on a number of economic activities, which all results in greater volatility of GDP compared to large states (Armstrong, & Read, 1998) They seek specialization in order to be internationally competitive, and often rely on one or two export products. The paper attempts to identify the characteristics that depend on the regional afÞliation of small states, as well as the similarities and differences between small states which belong to the same regional economic organization/integration

Local cultures and societies

Surface area in square kilometers

State x Bahrain x Belgium x Benin

Republic x El Salvador x Equatorial

Sao Tome and Principe

Conclusion