Small states have higher per capita GDP (are richer) than other states.
- This reflects a productivity advantage
- No certainty that a region of a country that becomes independent will enjoy higher productivity as a consequence: evidence may be due to small regions with higher productivity choosing to be independent while lower productivity regions may choose to be linked to bigger state.
- But there are mechanisms that could raise productivity in new small independent states: attraction of head office functions; better governance (?)
Large Markets, Gains from Trade, and a Puzzle, David Comerford, July 7, 2013,