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Is there a premium in the size of nations?

Author

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  • Joze Damijan
  • Sandra Damijan
  • Osiris Jorge Parcero

Abstract

This paper examines the size premium of nations. Using panel data for more than 200 countries over 50 years we estimate a size premium (in terms of being small) in a variety of key economic and socio-economic indicators of performance of countries. We find that small countries are richer, have larger governments, but are also more prudent in terms of fiscal policies. Smaller countries seem to be subject to paying higher absolute and per capita cost of provision of essential public goods, which may affect their socio-economic performance in terms of health and education. In terms of economic performance small countries seem to do better than large countries, by compensating for smallness with relying on foreign trade and foreign direct investment. The latter, however, comes at cost of higher vulnerability to external shocks resulting in higher volatility of growth rates.

Suggested Citation

  • Joze Damijan & Sandra Damijan & Osiris Jorge Parcero, 2013. "Is there a premium in the size of nations?," Working Papers of VIVES - Research Centre for Regional Economics 627716, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    • Handle: RePEc:ete:vivwps:627716
    Note: paper number 2013.40
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    File URL: https://lirias.kuleuven.be/retrieve/518175
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    Cited by:

    1. Jo Reynaerts & Jakob Vanschoonbeek, 2022. "The economics of state fragmentation: Assessing the economic impact of secession," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(1), pages 82-115, January.

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