Developing Countries and International Environmental Agreements: The Case of Perfect Correlation

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• 作者：Batabyal ; Amitrajeet A.
• 关键词：Q25 ; H77 ; D82
• 刊名：International Review of Economics and Finance
• 出版年：1998
• 出版时间：1998
• 年：1998
• 卷：7
• 期：1
• 页码：85-102
• 全文大小：884 K

文摘

This paper studies the pollution control problem faced by an imperfectly informed supranational governmental authority (SNGA) which wishes to design an international environmental agreement (IEA) for developing countries (DC). The SNGA cannot contract directly with polluting firms in the various DCs; it must deal with such firms through their national governments. Further, owing to national sovereignty, the SNGA is unable to either monitor the actions of DC governments and firms or enforce the terms of the IEA in the event of a contractual breach. In this setting, the properties of equitable IEAs in which similar DCs are held to similar environmental standards are studied. In particular, two cases are focused on. In the first case, governments and firms within individual DCs do not collude among themselves, and in the second case, they do. It is shown that when the private information of firms and governments across the two DCs is perfectly correlated, whether or not there is collusion, the SNGA can always implement the full information IEA in a Bayes-Nash equilibrium. My analysis tells us (i) that the significance of the monitoring and enforcement problem in such international settings has been exaggerated, and (ii) that technological similarities between DCs have a far greater bearing on the design problem than do the potentially deleterious effects of sovereignty. Indeed, there are a number of situations in which Pareto efficient IEAs can be designed by the SNGA.