On the Enforcement of Cooperative Environmental Policies

Review of Economic Dynamics, 2000, vol. 3, issue 3, pages 572-596

Abstract: This paper investigates the sustainability of Pareto optimal policies for the replenishment of renewable resources shared by two countries with asymmetrical wealth. It does so within a two-country neo-classical growth model with externality. In absence of commitment, it identifies simple self-enforcing mechanisms that implement social optima for a typical international resource (clean air) and a parameterization of the model to the United States and a country five times poorer. Such mechanisms are trigger strategies involving transfers of wealth between countries and threats of economic isolation in case of defection. Necessary transfers can represent up to 2.6% of US wealth. (Copyright: Elsevier)

Keywords: commitment; sustainable optima; dynamic game; renewable resource; trigger strategy; pollution; transfers (search for similar items in EconPapers)
JEL-codes: Q20 C73 C68 (search for similar items in EconPapers)
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Working Paper: A Two-Country Model of Renewable Resource Sharing
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