Introduction [Building the economic resilience of small states]

Abstract

The economic characteristics of small states are well documented, and include a high degree of economic openness, limitations of diversification possibilities, dependence on a narrow range of exports, limitations on the extent to which domestic competition policy can be applied, inability to influence international prices, and in the case of island states, high international transport costs and uncertainties of industrial supplies due to insularity and remoteness. Other related characteristics are a limited ability to exploit economies of scale, lack of natural resource endowments and a high import content (especially of strategic imports such as food and fuel). Small size also creates problems related to public administration in that many government functions tend to be very expensive per capita when the population is small, due to the fact that certain expenses are not divisible in proportion to the number of users.