Sources of Growth Spurts in Pacific Island Economies

Abstract

There has been a considerable amount of research into the growth of the Pacific island countries; however, there has been no attempt to identify episodes of growth (and nongrowth) and to identify and understand the factors behind these episodes. This narrative article examines the growth experiences of the eight small and micro states of the North and South Pacific that are members of the World Bank. The experience of Samoa and Vanuatu supports the idea that economic reform can lead to growth spurts. Overall, the narratives suggest that unless aid leads to changes in institutions and policies, it does not have longlasting positive growth impacts. As experience in the Federated States of Micronesia and the Republic of the Marshall Islands appears to show, substantial aid may raise Gross Domestic Product (GDP) growth for short periods, but may well have very adverse impacts over the long run.