per capita income than other countries, due mainly to productivity advantages. Similarly, Favaro et al<sup>13</sup> found small states had on average, higher median purchasing power parity (PPP) - adjusted income per capita than other developing countries but noted considerable disparity in per capita income across small states with a very wide range between the richest and the poorest. This was corroborated by the World Bank<sup>14</sup> which found the weighted average PPP adjusted income per capita for developing small states in 2010 was $7,831, compared to $1,247 for low income countries, $3,701 for those classified as lower middle income and $9,904 for upper middle income countries.

Similarly, there is little to suggest that small states have lower per capita growth rates than other developing countries although Favaro et. al.<sup>15</sup> underscore the fact that they often experience greater volatility in growth from one year to the next, partially on account of the volatilities in terms of trade. Smaller economies are more open to trade because they have to rely on imports to satisfy their domestic demand and exports tend to be highly concentrated in a few sectors. Easterly and Kraay<sup>16</sup> also note that small states tend to be characterized by higher income volatility. Domeland and Sander (2007)<sup>17</sup> compare 14 small states in Africa with other SubSaharan African countries and other small states. They find between 1970 and 2005 the average real GDP growth of African small states was 4.1 percent, compared to 3.2 percent for other countries in Sub-Saharan Africa and 3.5 percent in other small states. The average GDP per capita growth rate in small states in Africa, compared to other Sub-Saharan African countries, was twice as high and their median GDP per capita, US$ 2,217 in 2005, four times higher.

Researchers differ in their perspective of the pace and level of public debt accumulation in small states but find no evidence to correlate being a small state with levels of indebtedness or a “debt problem” specific to small states. Dodhia (2005)<sup>18</sup> documents the movement of external debt indicators in 26 small states from 1990 to 2003 and finds the stock of external debt increased by about 1.6 per cent per annum in the 1990s but the rate of growth accelerated to 5.6 per cent per annum between 1999 and 2003. This increase in indebtedness is attributed to three factors: low and volatile GDP growth; high and increasing public sector deficits resulting from a combination of lower revenues and higher expenditures; and higher borrowing costs as concessional

> 13 Favaro, E., Dömeland, D, O’Boyle,W.  and Stucka T. (2010) Small States, the Financial Crisis, and the Aftermath. Chapter of “Sovereign Debt and the Financial Crisis: Will This Time Be Different?” Edited by Braga, C. and Vincelette G.. Washington DC: The World Bank

> 14 World Bank _Statistics for Small States: A Supplement to the World Development Indicators 2011_ The World Bank

> 15 Favaro,E,  Dömeland, D, O’Boyle,W.  and Stucka T. (2010) Small States, the Financial Crisis, and the Aftermath. Chapter of “Sovereign Debt and the Financial Crisis: Will This Time Be Different?” Edited by Braga, C. and Vincelette G.. Washington DC: The World Bank

> 16 Easterly, W., and Kraay, A. (2000) “Small States, Small Problems? Income, Growth, and Volatility in Small States.” World Development 28 (11): 2013–27.

> 17 Domeland, D. and Gil Sander, F. _Growth in African Small States_ Working Paper, The World Bank 2007

> 18 Dodhia, D (2005) The Emerging Debt Problems of Small States. London: Commonwealth Secretariat.

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