Developing Countries and Environmental Protection: The Effects of Budget Balance and Pollution Ceiling Constraints
AbstractI analyze the problem faced by an asymmetrically informed supranational governmental authority (SNGA) with limited financial resources who wishes to design an International Environmental Agreement (IEA). The SNGA cannot contract directly with polluting firms in the various LDCs, but he must deal with such firms through their governments. I study this tripartite hierarchical interaction and focus on the properties of the optimal ex post contracts (IEAs), which can be implemented by the SNGA, in turn, in the case where governments and firms in each nation do not collude and then in the case where governments and firms do collude. I find that the monetary transfers necessary to induce optimal behavior by governments and firms are not very sensitive to the presence of collusion. However, because the optimal contracts satisfy budget balance, and because there is a ceiling on the amount of pollution reduction that an IEA can require, the level and pattern of pollution abatement are never ideal. My analysis suggests that IEAs are not inherently doomed due to a basic monitoring and enforcement problem arising from national sovereignty. However, the success of IEAs is fundamentally contingent on the funds available for environmental protection and the pollution reduction ceiling negotiated by the SNGA and the LDC government.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Utah State University, Department of Economics in its series Working Papers with number 9617.
Length: 34 pages
Date of creation: Jun 1996
Date of revision:
Publication status: forthcoming in Journal of Development Economics
environmental; agreement; LDCs; budget; ceiling;
Other versions of this item:
- Batabyal, Amitrajeet A., 1997. "Developing countries and environmental protection: the effects of budget balance and pollution ceiling constraints," Journal of Development Economics, Elsevier, vol. 54(2), pages 285-305, December.
- Batabyal, Amitrajeet A., 1996. "Developing Countries And Environmental Protection: The Effect Of Budget Balance And Pollution Ceiling Constraints," Economics Research Institute, ERI Study Papers 28347, Utah State University, Economics Department.
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Batabyal, Amittrajeet A., 1996.
"An agenda for the design and study of international environmental agreements,"
Elsevier, vol. 19(1), pages 3-9, October.
- Batabyal, Amitrajeet A., 1996. "An Agenda For The Design And Study Of International Environmental Agreements," Economics Research Institute, ERI Study Papers 28353, Utah State University, Economics Department.
- Batabyal, Amitrajeet A., 1996. "An Agenda for the Design and Study of International Environmental Agreements," Working Papers 9620, Utah State University, Department of Economics.
- Michael Hoel, 1992. "International environment conventions: The case of uniform reductions of emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(2), pages 141-159, March.
- Kofman, Fred & Lawarree, Jacques, 1993. "Collusion in Hierarchical Agency," Econometrica, Econometric Society, vol. 61(3), pages 629-56, May.
- Bernauer, Thomas, 1995. "The effect of international environmental institutions: how we might learn more," International Organization, Cambridge University Press, vol. 49(02), pages 351-377, March.
- Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
- Hurley, Terrance M. & Shogren, Jason F., 1997. "Environmental Conflicts and the SLAPP," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 253-273, July.
- Batabyal, Amitrajeet A., 1995. "Leading issues in domestic environmental regulation: A review essay," Ecological Economics, Elsevier, vol. 12(1), pages 23-39, January.
- Jean Tirole, 1988. "The Multicontract Organization," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 459-66, August.
- Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
- Black, Jane & Levi, Maurice D & de Meza, David, 1993. "Creating a Good Atmosphere: Minimum Participation for Tackling the 'Greenhouse Effect.'," Economica, London School of Economics and Political Science, vol. 60(239), pages 281-93, August.
- Todd Sandler & Keith Sargent, 1995. "Management of Transnational Commons: Coordination, Publicness, and Treaty Formation," Land Economics, University of Wisconsin Press, vol. 71(2), pages 145-162.
- Batabyal, Amitrajeet A., 1998. "Developing countries and international environmental agreements: The case of perfect correlation," International Review of Economics & Finance, Elsevier, vol. 7(1), pages 85-102.
- D. Lee & A. Batabyal, .
"Dynamic environmental policy in developing countries with a dual economy,"
2000-29, Utah State University, Department of Economics.
- Lee, Dug Man & Batabyal, Amitrajeet A., 2002. "Dynamic environmental policy in developing countries with a dual economy," International Review of Economics & Finance, Elsevier, vol. 11(2), pages 191-206, May.
- Amitrajeet Batabyal, 1999. "Developing Countries and Environmental Protection: Contract Design in Perfectly Correlated Environments," Open Economies Review, Springer, vol. 10(3), pages 305-323, July.
- Batabyal, Amitrajeet A., 1998. "On the irrelevance of collusion in perfectly correlated environments," International Review of Economics & Finance, Elsevier, vol. 7(4), pages 393-405.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John Gilbert).
If references are entirely missing, you can add them using this form.