The size of states and economic performance in the EU

Papers / 17.12.12
The size of states and economic performance in the EU

Along the lines of Price & Levinger’s flotilla effect theory, The size of states and economic performance in the European Union suggest that smaller states have a better economic performance when compared to big states. Authors of the study argue that it would be desirable and beneficial for society to go towards smaller political units. Albert Castellanos, Elisenda Paluzie and Daniel Tirado consider the size of countries, far from being an exogenous element in their economic systems, is a reality that corresponds to any economic incentives that can be derived from it.

They find conclusive evidence: Larger size, in the EU27, does not imply higher living standards. In fact, the average per capita income of countries with less than 10 million far exceeds that of the larger countries. In addition, in dynamic terms, there is a negative relationship between the size of economies and their growth.

A Catalan language version of this paper has been translated by Fundació Josep Irla.