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Small state regional cooperation, south-south and south-north migration, and international trade, Volume 1
 
Author:Schiff, Maurice; Country:World;
Date Stored:2010/05/07Document Date:2010/05/01
Document Type:Policy Research Working PaperSubTopics:Regional Economic Development; Economic Theory & Research; Population Policies; Trade and Regional Integration; Post Conflict Reconstruction
Language:EnglishRegion:The World Region
Report Number:WPS5297Collection Title:Policy Research working paper ; no. WPS 5297
Volume No:1  

Summary: This paper provides a different basis than previous analyses for regional bloc formation and regional migration. Due to low bargaining power and fixed costs, small states face a severe disadvantage in negotiations with the rest of the world and might benefit by forming a regional bloc. The study a) presents a general equilibrium model where bargaining power, international and regional negotiation costs, number of issues negotiated, and accession rule to the bloc determine its size and welfare impact; and b) examines the impact of international migration as well as the migration-trade relationship. The main findings are: i) the likelihood of regional bloc formation, its size and welfare impact, increases with international negotiation costs and the number of issues negotiated, and decreases with regional negotiation costs; ii) bloc size is optimal (below the optimum) if an accession fee is (is not) charged; iii) South-South migration raises bloc size and welfare; iv) South-South migration and trade are complements under market access negotiations and are substitutes under negotiations for unilateral transfers as well as under migrant remittances; and v) South-North migration and bloc formation, and South-North and South-South migration, are substitutes for the states that benefit from membership in the bloc.

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