We examine the stability of international environmental policy schemes when sovereign nations set policies to control both greenhouse gas emissions and traditional air pollutants. An international environmental policy scheme is defined to be stable if no country can obtain higher payoffs under other international environmental policy schemes. We show that when regional transnational air pollution damages are large relative to climate change damages, there are many efficient and stable international environmental policy schemes in which all nations belong to coalitions, the coalitions are completely interconnected and the income transfers promoted within all coalitions follow the Nash bargaining formula.
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2011-11)
Cornes, Richard C.; Silva, Emilson C. D.
Numerous non-profit organizations that contribute to collective goods also provide prestige to their members. Some of these institutions function as prestige clubs, with prestige levels and member contributions working as club goods and membership fees, respectively. We investigate the endogenous formation of prestige clubs. We show that the competitive equilibrium features prestige clubs and that competing club managers engage in a futile race for institutional aggrandizement. The competition, however, yields coordination benefits produced by internalization of positive and negative externalities within clubs. The competitive equilibrium is inefficient because clubs neglect external benefits and costs associated with their members’ contributions.
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2011-11)
Faria, João Ricardo; Silva, Emilson C. D.
This paper fills an important gap in the literature. It is the first systematic effort of addressing counterterrorism policy coordination failures due to transnational intertemporal externalities. As these externalities involve both spatial and time dimensions, non-cooperative policy coordination failures are better captured in a framework that allows us to consider two types of non-cooperative dynamic games, one in which national authorities are myopic and another in which they are farsighted. We show that the steady state outcomes for both types of non-cooperative games are characterized by larger counterterrorism expenditures than their counterparts in the social optimum. The farsighted equilibrium always yields greater levels of counterterrorism expenditures, terrorist activities and violence than those produced by the myopic equilibrium. Thus, the distortion produced by the farsighted equilibrium is greater than the distortion produced by the myopic equilibrium.
We examine the shape of federal policy making in three different policy scenarios, in which regional governments determine regional environmental policies to control correlated transboundary pollutants and the center implements interregional income transfers. We examine policy making under horizontal and hierarchical federal structures. In a horizontal structure, federal and regional governments make simultaneous policy choices. In hierarchical structures, federal and regional governments make sequential policy choices. Sequential choices may feature centralized or decentralized leadership. Our results indicate that hierarchical federal structures characterized by decentralized leadership may be socially superior to horizontal and hierarchical federal structures characterized by centralized leadership.