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International Environmental Agreements, Fiscal Federalism, and Constitutional Design

Author

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  • Wolfgang Buchholz
  • Alexander Haupt
  • Wolfgang Peters
Abstract
In this paper, we analyse how the prospect of international negotiations over transboundary pollution shapes intra-country transfer schemes when the governments of the countries' polluting regions are in charge of environmental policy and negotiations. Federal governments can implement compensation payments between domestic regions and matching grants prior to the international negotiations between the polluting regions. The subgame-perfect transfer schemes fail to fully internalise the environmental externality, leading to an inefficient international environmental agreement. As the international spillover increases, the intra-country compensation rates increase, while the matching rates decline, distorting the incentives for the regional governments in opposing directions. We also show that decentralisation of environmental decision making can arise endogenously.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Wolfgang Buchholz & Alexander Haupt & Wolfgang Peters, 2013. "International Environmental Agreements, Fiscal Federalism, and Constitutional Design," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 705-718, September.
    • Handle: RePEc:bla:reviec:v:21:y:2013:i:4:p:705-718
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    File URL: http://hdl.handle.net/10.1111/roie.12065
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    1. Boadway, Robin & Song, Zhen & Tremblay, Jean-Francois, 2007. "Commitment and matching contributions to public goods," Journal of Public Economics, Elsevier, vol. 91(9), pages 1664-1683, September.
    2. Beccherle, Julien & Tirole, Jean, 2011. "Regional initiatives and the cost of delaying binding climate change agreements," Journal of Public Economics, Elsevier, vol. 95(11), pages 1339-1348.
    3. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-255, May.
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    5. Kaul, Inge & Conceicao, Pedro & Le Goulven, Katell & Mendoza, Ronald U. (ed.), 2003. "Providing Global Public Goods: Managing Globalization," OUP Catalogue, Oxford University Press, number 9780195157413.
    6. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April.
    7. Wolfgang Buchholz & Alexander Haupt & Wolfgang Peters, 2005. "International Environmental Agreements and Strategic Voting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 175-195, March.
    8. Robert Dur & Hein Roelfsema, 2005. "Why does centralisation fail to internalise policy externalities?," Public Choice, Springer, vol. 122(3), pages 395-416, March.
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    10. Bard Harstad, 2012. "Climate Contracts: A Game of Emissions, Investments, Negotiations, and Renegotiations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(4), pages 1527-1557.
    11. Surjinder Johal & Alistair Ulph, 2002. "Globalization, Lobbying, and International Environmental Governance," Review of International Economics, Wiley Blackwell, vol. 10(3), pages 387-403, August.
    12. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
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    15. repec:bla:reviec:v:9:y:2001:i:3:p:414-28 is not listed on IDEAS
    16. Wolfgang Buchholz & Christian Haslbeck, 1997. "Strategic Manipulation of Property Rights in Coasean Bargaining," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(4), pages 630-630, December.
    17. Eckert, Heather, 2003. "Negotiating environmental agreements: Regional or federal authority?," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 1-24, July.
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    Cited by:

    1. Roolfs, Christina & Gaitan, Beatriz & Edenhofer, Ottmar, 2021. "Make or brake — Rich states in voluntary federal emission pricing," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    2. Ryusuke Shinohara, 2021. "Voluntary Participation in International Environmental Agreements and Authority Structures in a Federation: A Note," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(1), pages 25-32, May.

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    More about this item

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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