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05 September 2014Small countries benefit from independence

One of the world’s leading banks, Credit Suisse reports small countries have been among the economic success stories of the past twenty years. "In the case of Europe, older small counties, such as Sweden and Switzerland, fared much better during the Eurozone crisis."

While the assumption was made large countries would likely benefit from economies of scale, this generally wasn’t true.  Large countries tend to have higher tax rates by as much as 5 percent to fund their largesse.  The cost of funding public services is actually more on larger countries than smaller. The only area where the study found large countries exhibited a benefit from economies of scale was in public sector salaries.

Smaller countries, while they may not have the large and politically powerful multi-national corporations headquartered in their domains, collect more corporate tax than large countries. What was the reason for small country success? The report noted the rule of law seems to be a far more important determinant of economic success than political freedom. Source: http://www.valuewalk.com/2014/08/small-countries-gdp/

Download the full report here

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