Growth in small countries is neither more or less fast than in other countries but is more volatile.
- Small country growth benefits from greater openness to trade.
- Small country growth suffers from loss of scale: border effects (more trade within than between borders); technology (generation and adoption of new technologies may be harder); spillovers (greater within than between countries).
- Paradox between evidence of small country: higher income, higher productivity and evidence of small country: no growth differential and loss of scale benefits.
- Small country annual growth rates are more volatile, partly because of their greater volatility in responses to terms-of-trade shocks.
Small states, small problems? William Easterly (firstname.lastname@example.org) and Aart Kraay (email@example.com) No 2139, Policy Research Working Paper Series from The World Bank.
Trade, Growth and the Size of Countries, Alberto Alesina, Enrico Spolaore, Romain Wacziarg.
Is there a large-country advantage in high-tech? Jan Fagerberg