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Economic Performance of Small States and Islands: The Importance of Geography

Economic Performance of Small States and Islands: The Importance of Geography. Harvey Armstrong and Robert Read. Geography: Natural ‘Handicaps’. Small size Insularity Archipelagic Mountainous Landlocked Tropical Remoteness. Entities Researched. Sovereign small states

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Economic Performance of Small States and Islands: The Importance of Geography

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  1. Economic Performance of Small States and Islands: The Importance of Geography Harvey Armstrong and Robert Read

  2. Geography: Natural ‘Handicaps’ • Small size • Insularity • Archipelagic • Mountainous • Landlocked • Tropical • Remoteness

  3. Entities Researched • Sovereign small states - Under 5m population • Dependent territories - France, UK, USA, Netherlands, Australia, New Zealand • Regions with an unusual degree of autonomy (e.g. Faroe Is., French DOMs) • N = 127, of which islands=74

  4. Economic Challenges • Domestic market small (m.e.s.) • Limited resource base - Possible MIRAB response • Narrow domestic output, exports and export markets • Very open economies • Vulnerability

  5. Responses to Challenges • Export-led growth • Niche market specialisation • Draw resources and technology from global economy • Effective use of limited policy portfolio • The ‘importance of being unimportant’ • Cultural distinctiveness • Social capital?

  6. Islands and Transport Costs • Falling over time through combination of transport technology, transport infrastructure and production technology • Other problems: transport monopolies, reliability, stockholding costs, insurance costs, damage in transit, diseconomies in loads and routings, asymmetric on- and off-island freight flows • Other causes of higher island price levels: greater use of wholesale systems, diseconomies of scale in retailing and wholesaling, local monopolies in wholesaling and retailing, local taxation arrangements (e.g. liquor taxes)

  7. Mountains, Landlocked, Tropical Climate • Mountains: Fragmentation of markets and society; Agricultural and climatic challenges • Landlocked: difficult access to maritime container freight systems • Tropical: - Agriculture (soils, weather, global markets for tropical products) - Health related (especially malaria, HIV/AIDS)

  8. GNI per capita: World Bank; Own data set extension; sometimes PPP Four categories: under $745 pc, $746-$2975, $2976-$9205, Over $9206 Truncated data sets Non-harmonisation challenges Amelioration: robustness checks, least favourable assumptions, expose biases, classificatory and limited dep. Variable methods Data Sources and Problems

  9. Effect of Size: GNI per Capita, 2001

  10. Effect of Size: GNI per Capita, 2001, States Under 3m

  11. Islands, Archipelagos, Mountainous

  12. Landlocked, Tropical

  13. The Effects of Remoteness

  14. The Four-Cluster Solution

  15. Grouped (Censored) Regression

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