Eli5 Why do microstates (Liechtenstein, Monaco etc) have such high GDP per capitas?
In: 26
So most of these nations are set up as tax shelters. For example, Lichtenstein income tax tops at 8%. Monaco doesn’t have a personal income tax at all. That’s your reason.
Another interesting observation, however, is that even if not for this microstates would still probably occupy the upper echelon of GDP per capita. Why? Because the lower sample size you have, the higher a distribution you’ll get. America used to give funding incentives to schools based on test performance until they discovered both the highest and lowest performing schools were the districts with the least amount of students. Not because they were necessarily doing anything right or wrong, but because their natural variability was much higher. You see this with all sorts of statistics, such as crime rates. Or suicide rates. Or lottery winners. Or population with a PhD, etc.
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