The influence of agriculture on the structural economic vulnerability of small island spaces: Assessment using DEA based composite indicators

Abstract

Small island spaces are confronted with significant disadvantages that ultimately result in strong economic vulnerability. The conventional literature emphasizes the main role of agriculture in generating structural vulnerability. Specifically, the higher the weight of agriculture compared to other sectors is, the more structurally vulnerable an economy is. However, the recent food crises revealed that the economic dependence on agriculture is not a problem on its own, but the issue is rather the efficiency of this sector along with the orientation of domestic production towards diversification and food self-sufficiency. In this paper, we thus propose a new structural economic vulnerability indicator based on the assumption that promoting the local agriculture could boost development. We insert the share of the agriculture sector in the GDP proxied by imported food dependency into the ‘official’ economic vulnerability index. Moreover, for robustness, the proposed indicator is obtained based on an endogenous weighting system derived from data envelopment analysis. Finally, our simulations for a sample of 131 developing economies point out that considering food dependency reduces dramatically the exposure of small island economies to structural vulnerability.

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