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The long-run effects of regional integration are analyzed in this book. On the basis of the development of a model of endogenous regional growth (which combines an endogenous growth model with aspects of ""new"" economic geography) and an empirical analysis of stylized facts for the European case, the monograph looks on mechanisms by which regional integration measures affect long-run growth rates as well as production and trade patterns. Integration measure¤s include trade liberalization, liberalization of factor flows, harmonization of policies as well as an enlargement of an integration bloc. The previous literature has always stressed the importance of such growth rate effects of regional integration, but has not - due to the lack of an appropriate theoretical framework, analyzed these effects in detail. The study present is a step towards closing this gap in the literature. Keywords: Integration, Regional Integration, European Integration Contents: Introduction: The Issues; Objectives and Method; Organization.- Empirical Observations: European Regions; Technology, Geography, and Growth; Summary.- Literature Overview: Static Models; Growth and International Integrat¤ion.- Growth and Economic Geography: The Basic Elements; A Two-Country Model; Short-Run Equilibrium; The Steady-State; Physical Capital; Appendix; Summary.- Deeper Regional Integration: Liberalization in a Two-Country Setting; Reg¤ional Integration as Partial Liberalization; Regional and Harmonized Policies; Summary.- Enlarging the Integration Bloc: Integrating a Lagging Country; Integrating a Developed Country; Leapfrogging through Integration; Summary.

Direct foreign investment is incorporated in a dynamic general equilibrium model with endogenous technological change. In contrast to recent endogenous growth approaches, I allow for geographical separation of the innovation and production of newly developed goods. Firms acquire specific knowledge through R&D investment in the more developed country and use their specific asset to establish a production plant in the low‐cost country. Foreign direct investment is accompanied by interregional spillovers of knowledge from the more to the less advanced country. I derive a steady‐state equilibrium with active innovation and production activities in the high‐technology sector in both countries. Furthermore, the implications of factor flow liberalization as well as of industrial policies are investigated.