Vulnerability, trade, financial flows and state failure in small island developing states

Abstract

Small Island Developing States (SIDS) are very different to other developing countries. Relative to GDP they have the highest levels of foreign trade and aid receipts of all developing countries. Remittances from abroad are a far more important source of income for SIDS, and some depend very heavily on export revenues. The quality of governance varies tremendously among SIDS, they are over-represented among countries classified as fragile states and many are prone to state failure. These and other factors combine to make SIDS highly vulnerable to external economic shocks. Achieving development in SIDS is as a consequence an especially complex task that requires an understanding of the roles played by aid, trade, remittances and governance in these countries. This paper looks at these issues, along with providing various stylized facts about SIDS.