Essays on Small Remote Island Economies (SRIES)

This dissertation investigates small remote island economies (SRIEs)—a unique grouping of countries that has not been addressed systematically in the economics literature. The rationale behind this categorisation lies in the interactions of smallness, islandness and remoteness. These interactions might exacerbate the problems face by these economies, and possibly create new opportunities for them. This study consists of four essays which address their most important economic issues. The first essay brings SRIEs into context by drawing from the existing literature. Economists and other social scientists acknowledge the economic challenges of smallness: limited scale economies, limited resource endowments, economic concentration, high economic openness and consequent vulnerability to external shocks. Many small countries are also islands: islandness contributes to economic volatility because it increases the risks associated with environmental hazards, climate change, and man-made and natural disasters. The new category SRIEs highlights a well-documented economic problem—remoteness. However, there is little research on the implications of remoteness for small island economies. This thesis addresses this gap in the literature and seeks to better inform policy. Many SRIEs were affected by the dismantling of the Multifibre Agreement (MFA). MFA quotas guaranteed that the textiles and clothing (T&C) products of SRIEs had accessed to developed markets and protected these small economies from competitive larger developing countries. The second essay adopts a novel methodology—network analysis—to investigate the impacts of the ensuing trade liberalisation in T&C on SRIEs. The MFA altered T&C trade patterns: in the post-quota period, SRIEs preferred to trade with closer partners, thus, supporting the hypothesis that remoteness matters. Network statistics demonstrate that liberalisation led to convergence. SRIEs had a relative comparative advantage in final rather than intermediate products. An analysis of trade specialisation patterns confirms that MFA quotas created artificial comparative advantages. The third essay analyses individual cases of SRIEs through a global value-chain framework. T&C global fragmentation of production was shaped by quotas. A distance effect on trade is revealed as trade with relatively remote partners declined post-MFA. The results of a unit-value analysis support the thesis that those SRIEs that survived moved up the value-chain or upgraded to maintain competitiveness. Upgrading involved shifting to higher-valued products and niche markets but also integrating regionally. The last essay provides an alternative explanation for the notion of remoteness, particularly when viewed from a tourism perspective. Scholars agree that nature attracts tourists. An exploratory analysis shows that SRIEs are well-endowed in nature. Indeed, the econometric results show that remoteness is positively associated with tourism performance. Price acts as a sorting factor signalling the high-value tourist to choose less competitive but remote destinations; destination choices, hence arrivals, are price-dependent. However, price is irrelevant for expenditure per tourist. In sum, the cost of remoteness can be offset by its value. Remote island tourism is proposed as a positional good. Keywords: small islands, remoteness, network analysis, value-chain analysis, tourism JEL classification: F13; L67; L83; O50 ; R12