The Economic Performance of Small Versus Large Nations

The number of nations has quadrupled during the past 50 years, from 51 in 1945 to 210 in 1997. Globalization and the reduction of trade barriers have sharply reduced the disadvantages of smallness and encouraged the proliferation of new nations during the past decades. And there is no end in sight — some political scientists predict that the number of nations may double again during the next two or three decades. In this paper, we begin by classifying nations into large and small nations and then we examine the economic performance of small nations in relation to large nations over the past 12 years (1985–1997). Data availability and the greater relevance of the experience of the last dozen years make it the most feasible and useful period to study.