suggesting in finding ways to reduce the resulting disadvantages (provi- sion of only selected public goods, international outsourcing etc.). Some of the disadvantages listed in Table 5.1 have also been dis - cussed under the label «vulnerability» (e.g., Briguglio, 1995; Hintjens and Newitt, 1992). Table 5.1 aims to prove that the economic assessment 134
The economics of sovereignty: «secrets of success» of very small countries Disadvantages • diseconomies of scale in public good provision (Alesina and Wacziarg, 1998; Kocher, 2000; Robinson, 1960) • small size of the domestic market (diseconomies of scale in private production) (Armstrong et al., 1993; Briguglio, 1995; Kuznets, 1960) • diseconomies of scale in research, development and technology (Briguglio, 1995; Jewkes, 1960; Vakil and Brahmananda, 1960) • less competition on internal markets (Armstrong et al. 1993; Gantner and Eibl, 1999) • not a large enough home market of considerable size to back export strategies • poor domestic resource base, both raw materials and knowledge (limited and undiver- sified) (Bhaduri et al., 1982; Kuznets, 1960; Waschkuhn, 1990) • narrow range of domestic output (Selwyn, 1975) • limited possibility of import-substitu tion (Selwyn, 1975) • export and import dependency (Kuznets, 1960) • unstable export prices may harm VSC economies considerably (MacBean and Nguyen, 1978) • high proportion of imports in domestic consumption • geographic export specialization (Kuznets, 1960) • vulnerability with regard to exogenous shocks (internal balancing mechanisms of shock consequences are limited) (Amstrong et al., 1998) • internationally «neglected» (little power to pursue (economic) interests internationally) • special problems (depending on geographic variables): high transport costs, limited ac- cess to international transport networks (highways, railways, harbors), geographic fractionalization etc. (Baldacchino and Milne, 2000) • elite connectivity (Gantner and Eibl, 1999; Geser,
1993)
Table 5.1: Disadvantages and advantages of VSC