Updating and augmenting the economic vulnerability index

Abstract

The economic vulnerability index (EVI) was initially developed by Briguglio (1992, 1993, 1995) to explain the seeming contradiction that a country can be economically vulnerable and yet register a relatively high GDP per capita. Many versions of the index were produced following Briguglio's work, including Chander (1996), Wells (1997), Atkins et al. (1998, 2001) and Crowards (1999). The general conclusion that emerged from these studies is that small island developing states tend to be more economically vulnerable than other groups of countries. The characteristics of small island developing states (SIDS) are well documented (see for example, Briguglio, 199 5 ), and include limited ability to exploit economies of scale; lack of natural resource endowments and a high import content (especially of strategic imports such as food and fuel). Other characteristics relate to limitations of production diversification possibilities; dependence on a narrow range of exports; limitations on the extent to which domestic competition policy can be applied; inability to influence international prices; and, in the case of island states, high international transport costs and uncertainties of industrial supplies due to insularity and remoteness. Small size also creates problems associated with public administration, the most important of which is probably the small manpower resource base from which to draw experienced and efficient administrators. Another problem is that many government functions tend to be very expensive per capita when the population is small, due to the fact that certain expenses are not divisible in proportion to the number of users.