The University of Michigan's Joel Slemrod has a fascinating new paper examining how many small states commercialise their state sovereignty. This can ioccur in a variety of ways, from stamps to tax havens. His paper, Why Is Elvis on Burkina Faso Postage Stamps? Cross-National Evidence on the Commercialization of State Sovereignty (PDF), looks at four forms of commercialisation and the relationship between them. He concludes that countries that are poorer and smaller are, ceteris paribus, more likely to commercialise state sovereignty:
Commercialization is more attractive to poorer countries in three out of four cases, and in two cases to more agricultural countries at a given level of per capita income. This provides some support to the notion that when revenue is difficult to raise in other ways commercialization becomes more attractive. In three of four cases these activities are more attractive to small countries, a finding that is consistent with the Slemrod and Wilson (2007) hypothesis about tax havens that the benefits are unrelated to size but the costs are.
But there are downsides too, ranging from "costs related to integrity" to sanctions "for less benign activities".