Take one or more at a time? Issue linkage versus ringfencing with common shocks

Frank Stähler () and Sophia Vaaßen ()
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Frank Stähler: University of Tübingen, CESifo and NoCeT
Sophia Vaaßen: University of Tübingen

Economics Bulletin, 2025, vol. 45, issue 1, 288 - 299

Abstract: Countries cooperate on certain issues like trade and environmental policies through international agreements. These agreements can be comprehensive and cover several issues (issue linkage) or deal with issues separately (ringfencing). A sovereign country experiencing a negative shock may want to withdraw from an agreement even if its exit harms other countries. Under ringfencing, each issue is subject to a separate agreement, and this agreement is terminated if one country has a bad outcome. Under issue linkage, the agreement is only terminated if one country has a bad realization for both issues. Common shocks make ringfencing relatively more attractive since they increase (decrease) the probabilities for all cases in which ringfencing (issue linkage) is the preferred mode of cooperation.

Keywords: issue linkage; ringfencing; common shocks; international agreements; exit (search for similar items in EconPapers)
JEL-codes: F1 Q5 (search for similar items in EconPapers)
Date: 2025-03-30
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