National identity and the political economy of small states

Building on insights from Katzenstein and Gellner, the authors theorize that small, culturally homogeneous countries with a strong national identity have institutional advantages that tend to enhance their long-term socioeconomic performance. They can coordinate policy in ways that help them respond successfully to external vulnerabilities by building institutional capacities for cooperation, sacrifice, flexible maneuvering, and concerted state action in the national interest. The emphasis on culture and national identity is an important innovation in understanding the political economy of small states. The theory is illustrated by means of an extended analysis of Denmark.