International positive production externalities under a transfer payment scheme – the case for cooperation

Charalampos Savvidis ()
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Charalampos Savvidis: Panteion University, Department of Economic and Regional Development, Athens, Greece.

SPOUDAI Journal of Economics and Business, 2011, vol. 61, issue 1-2, 80-117

Abstract: In the present work we try to find out whether the existence of positive international externalities generates an incentive for cooperation between governments and if the adoption of a transfer payments scheme moderates that intensive. We adopt a simple economic model incorporating the international linkage of national economies. Utility proves always to be higher when countries cooperate than when they play Nash to each other. We then add a transfer payment scheme and prove it intensifies the intensive to cooperate, since a moral hazard problem arises on the top of the free riding problem.

Keywords: Optimal Taxation; International Policy Coordination; Production Externalities; Foreign Aid; Intertemporal Choice. (search for similar items in EconPapers)
JEL-codes: F35 F42 H23 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spd:journl:v:61:y:2011:i:1-2:p:80-117

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