The long run survival of small nations. A dynamic view

Patrice Pieretti, Skerdilajda Zanaj and Benteng Zou

No 437, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: In this paper, we analyze the dynamics of a very small economy which tries to attract foreign investments. For that purpose, we model the intertemporal behavior of a small jurisdiction using taxes and attractive public infrastructures as policy instruments, for given policy choices of the rest of the world. Applying Pontryagin's maximum principle, we then characterize the potential steady states which are attainable. These results give some insights into the policy behavior that may guarantee the long run survival of very small economies.

Keywords: Country size; Foreign direct investments; Public goods competition; Spatial competition (search for similar items in EconPapers)
Date: 2011-08-16
New Economics Papers: this item is included in nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:437

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