Diseconomies of scale in Small Island Developing States

Small Island Developing States (SIDS) are unable to achieve economies of scale due to limited population size and local demand, large distance to major economies, dependence on foreign skilled labor, imperfect competition, disputes over land management, and high costs of solving environmental problems.

During a lunch seminar at Ministerie van Binnenlandse Zaken en Koninkrijksrelaties, Paul Tauxe, analyst at Economisch Bureau Amsterdam / Amsterdam Bureau for Economics and student at the Toulouse School of Economics, presented the results of his research into diseconomies of scale/lack of economies of scale in SIDS. His empirical research shows that the costs of public services are higher in SIDS than in other countries due to the lack of economies of scale. SIDS can achieve economies of scale by specializing in export-oriented sectors, by developing population and migration policies, by intensifying regional and international cooperation and through policies aimed at adapting technological development. The results of the research will soon be published in a working paper by Economisch Bureau Amsterdam / Amsterdam Bureau for Economics.

The presentation slides can be viewed here.