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Compliance Technology and Self-enforcing Agreements

Author

Listed:
  • Bård Harstad
  • Francesco Lancia
  • Alessia Russo
Abstract
This paper analyzes a game in which countries repeatedly make emission and technology investment decisions. We derive the best equilibrium, that is, the Pareto-optimal subgame-perfect equilibrium, when countries are insufficiently patient for folk theorems to be relevant. Relative to the first best, the best equilibrium requires countries to overinvest in technologies that are green, that is, strategic substitutes for polluting, but to underinvest in adaptation and brown technologies, that is, strategic complements to polluting. Technological transfers and spillovers might discourage investments but can be necessary to motivate compliance with emissions when countries are heterogeneous.

Suggested Citation

  • Bård Harstad & Francesco Lancia & Alessia Russo, 2019. "Compliance Technology and Self-enforcing Agreements," Journal of the European Economic Association, European Economic Association, vol. 17(1), pages 1-29.
    • Handle: RePEc:oup:jeurec:v:17:y:2019:i:1:p:1-29.
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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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