The relation between economic resilience and competitiveness in small island states

Abstract

The objective of this chapter is to discuss the relationship between economic resilience and economic competitiveness with special reference to small island states. Economic resilience and economic competitiveness are both associated with economic success, however they relate to different aspects of such success. Economic resilience relates to the ability of an economy to withstand or reduce the harm associated with external shocks while economic competitiveness generally refers to the ability of an economy to survive in a productivity contest with other economies. The chapter utilizes an index of economic resilience across countries, constructed by the present author, and shows that this index is highly correlated with an index of competitiveness, also across countries, derived from the Global Competitiveness Indicators. The chapter argues that small states should assign major importance to resilience-building policies, in view of their high exposure to economic shocks, and to the enhancement of competitiveness, in view of high dependence on exports; and that it would be beneficial for small states to embed policy measures associated with resilience and competitiveness in their national development strategies and plans.