Dynamic Externalities and Policy Coordination

Leonard Mirman and Manjira Datta

CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: We introduce the possibility of trade in dynamic models with externalities and evaluate the consequences on the capital accumulation process, the market-clearing prices and policy making. We consider mixed economies characterized by a blend of strategic and nonstrategic sectors. An equilibrium exists in the bilateral monopoly game because the strategic planner incorporates the future utlity of the country and the presence of a nonstrategic sector in its decision making. Capital externality is one source of interdependence. Equilibrium price, a function of both outputs, is another. Policy coordination is advantageous only when preferences are dissimilar and an externality is present.

Keywords: Dynamic games; Externality; Policy coordination; Trade and Growth (search for similar items in EconPapers)
JEL-codes: C73 D90 E61 (search for similar items in EconPapers)
Date: 1996-10
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Journal Article: Dynamic Externalities and Policy Coordination (2000)
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Working Paper: Dynamic Externalities and Policy Coordination
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Persistent link: https://EconPapers.repec.org/RePEc:san:crieff:9608

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