Do island states have better institutions?

Since the end of World War II, the number of countries in the world has increased dramatically. Many of these newly independent countries are small both in terms of population and geography, and several are islands. The purpose of this paper is to explore the effects of island status and country size on institutional quality, and to determine if these institutional effects can explain the relatively strong economic performance of islands and small countries. I distinguish between political institutions (Democracy) and economic institutions (Rule of Law). One of the main findings of this paper is that the relationship between island status and institutional quality is significantly positive, and that these results are robust to the inclusion of a number of control variables. Further, I find that country size is negatively related to institutional quality, which is in keeping with previous results. These results provide further support for the hypothesis that institutions account for these countries’ relatively better economic performance.

The abstract of the paper is here (Congdon Fors, Journal of Comparative Economics, June 2013). 

When Voice Fails

Poorly governed (e.g., repressive) countries tend to be located near other poorly governed countries, and well governed countries near other well governed countries. Researchers, by identifying country characteristics (e.g., ethnic fractionalization) that may influence government quality, have provided one potential explanation: Neighboring countries tend to be similar with respect to those characteristics. In this paper, we draw on Hirschman's notion ofexit” as a disciplining device in order to provide a different, though complementary, explanation: The ability of a ruler to implement policy that displeases the country's populace is constrained by opportunities for residents to relocate to other countries nearby. To generate testable predictions about the effects of potential exit on government quality, we develop a simple theoretical model. We test the model's predictions using cross-sectional and panel data, controlling for other determinants of government quality. The evidence we present - which includes discussion of historical examples such as ancient Greece and the Soviet Bloc - supports the model's predictions.

Source: Fleck & Hanssen (International Review of Law and Economics, February 2013). The title of the paper is "When Voice Fails: Potential Exit as a Constraint on Government Quality."

Think about the implication of that theory and findings for island countries.