Small country size and returns to scale in manufacturing

Abstract

This paper tests the hypothesis that small country size is associated with constraints relating to economies of scale in manufacturing. The study adopts a production function approach, utilizing data from 43 differently sized countries. The results, confirming the hypothesis, lend empirical support to the presumption that small countries face serious disadvantages in terms of production cost per unit in their manufacturing sectors, suggesting that such countries are, as a result, seriously disadvantaged in terms of international competitiveness in manufacturing trade.