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.