The determinants of economic growth in small states

Abstract

This paper provides a critical survey of the principal theoretical issues and empirical findings relating to the analysis of the economic growth of small states. This analysis provides a brief critique of the inapplicability of the Lewis model of industrialization to small states. It draws upon insights derived from endogenous growth theory to demonstrate that growth in small states can be explained by the key 'conditioning' variables, notably openness to trade, human capital accumulation and location. Further, the impact of small size and 'islandness' are argued to play less significant roles than that generally ascribed to them in the literature. The findings provide useful policy lessons for other small states and developing countries.