Liechtenstein Politische Schriften
Contingent on the results in the following empirical chapter – where we try to answer the question of whether diseconomies of scale really play a role in the public sector – the extent of diseconomies of sca- le might be a good starting point for an appropriate definition of VSC. Specifically, we are interested in the extent of diseconomies of scale in the production and provision of public goods, or, in other words, in the deviation from cost-optimal production. Note that publicly provided goods are one of the main characteristics of countries from a public eco- nomics viewpoint. Assuming that our theoretical considerations are em- pirically confirmed, a workable definition of country size should consist of three major features: – (a) A VSC is a country with full sovereignty and international reco- gnition. Feature (a) is necessary, since the aim here is to investigate public sector peculiarities of small 
countries.22Concepts of sovereignty (in economics as well as in international law and political science) have been developing over the last decades because of the process of in- ternationalization. One possible traditional definition of full sover- eignty is associated with constitutional independence, which means that countries are fully sovereign if their constitution is not part of a larger constitutional arrangement. A sovereign country is not sub- ordinate to another country, but necessarily equal to it by interna- tional law. The country’s legal, executive and judicial powers are the supreme authority within its jurisdiction, which is what we would call in economic terms a territorial monopoly (James, 1986; Jack son, 1990). Of course, recent developments especially within the Euro - pean Union do not comply with this traditional view of sovereign- ty. International courts also considerably restrict sovereignty for many countries in the world. One either can conclude that coun - tries like Germany or France are not sovereign any more, which does not make much sense, or accept the fact that a generally valid distinction between fully sovereign and not fully sovereign coun- tries is difficult and that there is a continuum for a possible cut-off 31 
Applied definition of country smallness 22We will however also have a look at the differences between independent VSC and autonomous regions later on.


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