International Environmental Agreements, Fiscal Federalism, and Constitutional Design
AbstractIn 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.
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Bibliographic InfoPaper provided by RECAP15, European University Viadrina, Frankfurt (Oder) in its series Discussion Paper Series RECAP15 with number 002.
Length: 17 pages
Date of creation: Mar 2012
Date of revision:
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Fiscal federalism; transboundary pollution; international environmental agreement; constitutional design; matching grants;
Find related papers by JEL classification:
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- F51 - International Economics - - International Relations 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-CDM-2013-01-19 (Collective Decision-Making)
- NEP-ENE-2013-01-19 (Energy Economics)
- NEP-ENV-2013-01-19 (Environmental Economics)
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