"Does economic size matter for economic development outcomes? If so are current policies adequately addressing the role of size in the development process? Using working age population as a proxy for country size, Open and Nimble, systematically analyzes what makes small economies unique.
Small economies are not necessarily prone to underdevelopment and in fact can achieve very high income levels. Small economies, however, do tend to be highly open to both international trade and foreign direct investment, have highly specialized export structures, and have large government expenditures relative to their Gross Domestic Product.
The export structures of small economies are concentrated in a few products or services and in a small number of export destinations. In turn, this export concentration is associated with terms of trade volatility, which combined with high exposure to international trade, implies that small economies tend to face more volatility on average as external volati
