> The total population matters only when you measure effects that change when the scale changes.
> I see no reason why small cities and countries can't be used as examples in youth health.
This is not correct; you're assuming that every location always expresses the average of every effect.
In reality, small absolute populations mean more variance in the measurement/expression of everything. This is why the top and bottom of lists of statistics per capita are always dominated by small populations. Doesn't matter what statistic you're measuring.
This makes it very dangerous to try to generalize from a finding in an anomalously small population.
With increased size, government becomes less efficient (as you need to have more layers of management) - so any policies that require implementation by the administrative bodies should work better in Iceland than in countries with one/two/three/four orders of magnitude more people.
It's not that the scale changes, it's that the statistics count too few events to properly handle external factors. When you're looking a cohorts of around 4000 people, small things can change things by multiple percent.
I see no reason why small cities and countries can't be used as examples in youth health. They are often perfect places to used for testing things.