Is there a premium in the size of nations?

This paper examines the size premium of nations. Using panel data for more than 200 countries over 50 years we estimate a size premium (in terms of being small) in a variety of key economic and socio-economic indicators of performance of countries. We find that small countries are richer, have larger governments, but are also more prudent in terms of fiscal policies. Smaller countries seem to be subject to paying higher absolute and per capita cost of provision of essential public goods, which may affect their socio-economic performance in terms of health and education. In terms of economic performance small countries seem to do better than large countries, by compensating for smallness with relying on foreign trade and foreign direct investment. The latter, however, comes at cost of higher vulnerability to external shocks resulting in higher volatility of growth rates.status: Published onlin