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Small State Regional Cooperation, South-South and South-North Migration, and International Trade

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  • Schiff, Maurice

    ()
    (World Bank)

Abstract

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 (IC) and regional (RC) negotiation costs, number of issues negotiated (N), 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 IC, N and decreases with RC; 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 vi) 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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4938.

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Length: 21 pages
Date of creation: May 2010
Date of revision:
Publication status: forthcoming in: Journal of Economic Integration, 2014
Handle: RePEc:iza:izadps:dp4938

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Keywords: South-North migration; South-South migration; regional cooperation; small states; trade;

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References

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  1. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
  2. Andriamananjara, Soamiely & Schiff, Maurice, 1998. "Regional groupings among microstates," Policy Research Working Paper Series, The World Bank 1922, The World Bank.
  3. Artjoms Ivlevs & Jaime de Melo, 2008. "FDI, the Brain Drain and Trade: Channels and Evidence," Development Working Papers, Centro Studi Luca d\'Agliano, University of Milano 261, Centro Studi Luca d\'Agliano, University of Milano.
  4. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  5. Kugler, Maurice & Rapoport, Hillel, 2007. "International labor and capital flows: Complements or substitutes?," Economics Letters, Elsevier, Elsevier, vol. 94(2), pages 155-162, February.
  6. Javorcik, Beata S. & Özden, Çaglar & Spatareanu, Mariana & Neagu, Cristina, 2011. "Migrant networks and foreign direct investment," Journal of Development Economics, Elsevier, Elsevier, vol. 94(2), pages 231-241, March.
  7. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, Elsevier, vol. 14(3-4), pages 341-356, May.
  8. Ramón López & Maurice Schiff, 1998. "Migration and the Skill composition of the Labor Force: The Impact of Trade Liberalization in LDCs," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 31(2), pages 318-336, May.
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