This paper will present a multi-region/multi-country model in which inter-regional knowledge spillovers determine the growth of regions. Key parameters in the model are the learning capability of a region and the rate of knowledge generation (R&D). The intensity of spillovers depends on geographical distance between regions. The model is investigated by means of simulation techniques. What results is a core-periphery situation, the exact form of which depends on the assumed spatial structure. The impact of economic integration is investigated by introducing barriers-to-knowledge-spillovers in the model in the form of borders between countries. Contrary to the popular belief and some economic theories, we find that removing such spillover barriers may result in larger disparity of income levels between regions.