Why we need small countries: they experiment with policies

Small countries are often considered a nuisance. They are sometimes tax havens that annoy larger countries because it increases tax competition. They have more weight than their size in international organizations (UN, European Commission, ECB) or sports organizations (FIFA), which at least in the latter case encourages corruption. And they increase sample sizes in cross-country regressions without truly adding information, sometimes leading to erroneous results. But small countries are also great because it allows to experiment with policies.

That is the argument of Jeffrey Frankel. He gives plenty of examples of innovative policies adopted in small countries that turned out to be good choices. In many cases, it looks like larger countries would also benefit from adopting them, that is, smallness is not a necessary condition for success. A good read with a boatload of interesting anecdotes to bring up in conversation.

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