The peripherality of EU regions : a quantitative evaluation based on economic concepts

Economics is the study of how scarce resources, including human, physical and technological capital, are allocated between competing uses towards the production of goods and services. This typically involves an assessment of supply capabilities and demand patterns, with prices acting as a signal for resources to move into the most productive and socially desirable applications. Cases of market failure where prices do not effectively perform these functions are notorious, arising out of the existence of external effects and the presence of market imperfections, which may result in an inefficient allocation of resources and an inequitable distribution of income. These instances underpin the economic justification for government intervention in the economy aimed at improving the allocation of resources towards improving social welfare.peer-reviewe

Conceptual issues in constructing composite indices

This paper presents an analysis of the conceptual issues associated with the construction of composite indices. Composite indices, which are constructed by averaging a number of indicators or sub-indices, are multidimensional, in that they represent aggregate measures of a combination of factors. They are often used to simplify complex measurement constructs, and often have a strong political appeal due to the fact that they simplify complex matters into a single number. However, composite indices are often criticized due to their subjectivity. Indeed the methodology used to construct an index generates considerable debate on various aspects, such as the weighting method used, possible correlation among the different sub-indices, missing variables, standardisation procedures and others. This paper will attempt to propose some desirable criteria for the construction of composite indices, including simplicity, ease of comprehension, and coverage issues and transparency. It will also discuss a number of methodological considerations including weighting. An analysis and evaluation of the different methods used by a selection of renowned composite indices, including the University of Malta’s resilience index, and the effects of certain assumptions on results will also be carried out.peer-reviewe

Measuring vulnerability : a methodological review and a refinement based on partner country and price volatility issues

Indexes of vulnerability are intended to measure the proneness of countries to exogenous shocks lying outside their control, or to the increased susceptibility of such countries to the adverse effects of these shocks. The main attempts to measure vulnerability found in the literature focus mainly on openness to international trade and capital flows, export concentration and dependence on strategic imports. This paper presents a conceptual refinement to these ideas by assessing the importance of the stability of partner countries and of price volatility as important determinants in the way in which such variables impact on vulnerability. Subject to the usual measurement problems, the index proposed here generally confirms that small states, particularly if insular, tend to face heightened degrees of vulnerability.peer-reviewe

Economic Vulnerability and Resilience: Concepts and Measurements

In this paper, economic vulnerability is defined as the exposure of an economy to exogenous shocks, arising out of economic openness, while economic resilience is defined as the policy-induced ability of an economy to withstand or recover from the effects of such shocks. The paper briefly reviews the work already carried out on economic vulnerability and extends the research towards the development of a conceptual and methodological framework for the definition and measurement of economic resilience. Towards this end, the paper proposes an index of economic resilience gauging the adequacy of policy in four broad areas, namely macroeconomic stability, microeconomic market efficiency, good governance and social development. The analysis of economic resilience explains how small economies can attain a relatively high level of gross domestic product (GDP) per capita if they adopt appropriate policy stances. In other words, the relatively good economic performance of a number of small states is not because, but in spite of, their small size and inherent economic vulnerability. The results of this study can be used as a tool towards the formulation of policies aimed at overcoming the adverse consequences of economic vulnerability.economic vulnerability, economic resilience, small states

Small states and the pillars of economic resilience

This chapter presents an analysis of the conceptual issues associated with the construction of composite indices. Composite indices, which are constructed by averaging a number of indicators or sub-indices, are multi-dimensional, in that they represent aggregate measures of a combination of factors. They are often used to simplify complex measurement constructs, and often have a strong political appeal due to the fact that they simplify complex matters into a single number. However, composite indices are often criticised for their subjectivity. Indeed the methodology used to construct an index generates considerable debate on various aspects, such as the weighting method used, possible correlation among the different sub-indices, missing variables, standardisation procedures and others. This paper will attempt to propose some desirable criteria for the construction of composite indices, including simplicity, ease of comprehension, and coverage issues and transparency. It will also discuss a number of methodological considerations including weighting.peer-reviewe

Vulnerability and resilience : concepts and indicators for economies with a high agricultural import content

Economic vulnerability is associated with exposure to exogenous shocks, related to the inherent characteristics of a particular economy, such as high degrees of economic openness, export concentration and dependence on strategic imports. The exposure is considered to be permanent or quasi-permanent and cannot be assumed to be responsive to policy measures. Economic resilience, on the other hand, refers to the ability of an economy to recover from or adjust to the negative impacts of external economic shocks. Thus the risk of being adversely affected by an exogenous shock is a function of two elements, the first is associated with the inherent conditions of the country that is exposed to the shocks and the second associated with conditions developed to absorb, cope with or bounce back from external shocks. This paper will discuss the concepts of vulnerability and resilience, which have been extensively researched in small states studies, and their relevance for economies with a high agricultural import content. There are obvious vulnerability connotations when a country depends heavily on agriculture, especially on imported food for consumption. It can be argued that where resilience is typically weak, vulnerability tends to retard growth in the initial phases of development, thereby contributing to slow down convergence between developed and developing countries. Thus, in the absence of resilience building policies, countries with a high vulnerability due to high agricultural import content may suffer adverse effects on economic growth.peer-reviewe

Towards the development of the concept and the measurement of economic resilience

This paper develops a conceptual and methodological framework for the analysis and measurement of economic resilience. The working definition of economic resilience adopted in this paper is the "nurtured" ability of an economy to recover from or adjust to the effects of adverse shocks to which it may be inherently exposed. This concept is used to provide an explanation as to why a number of inherently vulnerable countries have attained relatively high levels of GOP per capita. The paper also presents a tentative approach aimed at developing an index of economic resilience covering four aspects namely macroeconomic stability, microeconomic market efficiency, governance and social development.peer-reviewe

Profiling economic vulnerability and resilience in small states : conceptual underpinnings

Small states are economically vulnerable because of their inherent proneness to exogenous shocks over which they can exercise very little control, if any. Such shocks in the main emanate from the small states’ structural openness to international trade, their high dependence on a narrow range of exports and their reliance on strategic imports, notably fuel and food. The high degree of fluctuations in GDP and in export earnings registered by many small states is considered as one of the manifestations of exposure to exogenous shocks. In spite of this, there are a number of small states that have managed to generate a relatively high GDP per capita. This is ascribed to their economic resilience, which refers to the policy-induced ability of an economy to recover from or adjust to the negative impacts of adverse exogenous shocks.peer-reviewe

Small states and the pillars of economic resilience

Small developing states tend to be inherently prone to exogenous shocks over which they can exercise very little control, if any. In the main such proneness emanates from these states' structural trade openness and their very high dependence on a narrow range of exports. There are a number of small developing states that, in spite of their economic vulnerability, manage to generate a relatively high GDP per capita when compared with other developing countries. This can be ascribed to economic resilience building, which Briguglio et al. (2006) associate with policy-induced measures that enable a country to recover from or adjust to the negative impacts of adverse exogenous shocks and to benefit from positive shocks. Briguglio et al. argue that economic resilience depends upon appropriate policy interventions in four principal areas, namely macroeconomic stability, microeconomic market efficiency, good governance and social development.peer-reviewe