I would first approach your neighbors about the situation, then the son. Chances are they will do something about it, especially to keep the peace between neighbors. Be sure to be considerate to them, as well (you've heard the phrase that you get more bees with honey...). Play up the sympathy about having a baby and not getting much sleep, regardless, and the dog barking is really adding to the lack of sleep, as it wakes up your baby & you. Then add a simple request to please let the dog in when they hear it.
I had a dog, and she was normally quiet unless the neighbors dog was out - then they'd bark back and forth. I would get her ASAP and bring her in (sometimes it would take a minute if I was in the bathroom or changing my son's diaper....but nothing too long). See if they get to the dog in a reasonable length of time, considering they may be in the middle of something. The adults may not be stepping in since it's their son's dog....but having that request may push them to do so, when needed. Also stress that during the day it isn't quite as much of an issue as it is at night or during naptime (and name a specific time, if possible).
My reasons for recommending this is your statement that you have a good relationship with your neighbor. I assume you want to keep it that way, and you sound like a pretty understanding person, too. I would hesitate to call the police or association if a simple request would do the trick & be much friendlier. Oh, and keep in mind - you guys may one day be on the other end or your child can do something that requires them to approach you....so treat them how you would want to be treated! :)
Best wishes - I do know how frustrating it is.