Growth and Deeper Regional Integration in a Three-Country Model

We use an endogenous growth model of three countries to investigate the dynamic effects of deeper economic integration between two countries in the presence of an outside world. We look at the long-run effects of inner-union trade liberalization, the union's external trade policy, and of the relaxation of the inner-union barriers to migration. It is shown that regional integration via inner-union trade liberalization can lead very well to a decline of the steady-state growth rates