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Small state regional cooperation, south-south and south-north migration, and international trade

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  • Schiff, Maurice

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 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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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5297.

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Date of creation: 01 May 2010
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Handle: RePEc:wbk:wbrwps:5297

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Keywords: Trade and Regional Integration; Population Policies; Economic Theory&Research; Post Conflict Reconstruction; Regional Economic Development;

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  1. 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.
  2. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
  3. Andriamananjara, Soamiely & Schiff, Maurice, 1998. "Regional groupings among microstates," Policy Research Working Paper Series 1922, The World Bank.
  4. Artjoms Ivlevs & Jaime de Melo, . "FDI, the Brain Drain and Trade: Channels and Evidence," Discussion Papers 08/40, University of Nottingham, GEP.
  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. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  7. Javorcik, Beata S. & Ozden, Caglar & Spatareanu, Mariana & Neagu, Cristina, 2006. "Migrant networks and foreign direct investment," Policy Research Working Paper Series 4046, The World Bank.
  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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