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...

"Based on static analysis, a number of studies argue that forming a regional trade agreement is more likely to raise welfare if member countries are "natural trading partners," while other studies claim that the opposite is true. Schiff and Wang look at the argument from a dynamic viewpoint by...