Description
Small countries have often argued that the interaction of factors such as diseconomies of small scale, hugh costs for imported inputs, the cost of isolatin and remoteness, and the costs of physical dispersion have hindered their ability to attract foreign investment in a globalised market.
This publication is a study of the operating costs confronting the private sector in small economies, with the view to determine whether these act as a fundamental impediment to trade and investment. Is the private sector in these economies fundamentally disadvantaged in its preparations for globalisation because its costs are higher than in large ones? Further, are any of the detectable cost structure disadvantages the result of poor economic management and/or of fundamental structural characteristics? The outcome of the study offers a brief speculation on the tupe of policy interventions the international community could devise to assist those countries that face high costs structures by virtue of their inherent structural characteristics.
Contents
Executive Summary
1. Introduction
2. The Conceptual Building Blocks
2.1 Economic Theory: When Comparative Advantage is Not Enough
2.2 The Approach
2.3 Defining Economic Size
2.4 Size and Location: A Fundamental Dilemma
2.5 About this Report
3. The Business Cost Data
Annex 3.1
4. The Costs of Smallness
4.1 Airfreight
4.2 Seafreight
4.3 Labour Market
4.3.1 Nominal Wages in US dollars
4.3.2 Availability of Workers
4.3.3 Manufacturing Labour Costs
4.4 Utilities
4.4.1 Telephone
4.4.2 Electricity
4.4.3 Water
4.4.4 Fuel
4.5 Passenger Air Travel Costs
4.6 Land
4.7 Conclusion
Annex 4.1
Annex 4.2
5. Costs in Three Example Industries
5.1 The Input-Output Data
5.2 The Cost Disadvantage Factors
5.3 Defining Cost Inflation Factors and Income Penalties
5.4 Cost Inflation and Income Penalties: The Estimates
Annex 5.1: GTAP Definitions
6. Smallness and Policy
6.1 Bank Interest Rates
6.2 Corporate Taxes
6.3 Import/Export Duties
6.4 General Indirect Taxes and Budget Deficits
6.5 Conclusion
7. Conclusion
References
Appendix 1: Survey Questionnaire