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Economic Targets And Loss-Aversion In International Environmental Cooperation

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  • Doruk İriş

Abstract

In the standard emission problem, each country’s ruling party decides on an optimal level of emissions by analyzing the cost and benefit to the country. However, such policy decisions are often influenced by political parties’ incentives to be elected. Voters tend to give higher priority to economic issues than they do to environmental ones. As a result, political parties have additional incentives to reach a critical economic benefit level, at a cost of higher emission level, in order to satisfy voters’ expectations in economic issues. Therefore, this study explores the implications of political parties being averse to insufficient economic performance relative to a critical economic target level on sustaining an international environmental agreement on emission levels. In doing so, we allow countries to have asymmetric concerns about economic targets, as well as asymmetric technology levels. We find that stronger concerns about economic targets deter the most cooperative emission levels countries could jointly sustain. Furthermore, technological asymmetry could either deepen or offset this impact. These results suggest that efforts on achieving substantial international environmental agreements should be supported at the citizen level to eliminate the adverse effects.
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  • Doruk İriş, 2016. "Economic Targets And Loss-Aversion In International Environmental Cooperation," Journal of Economic Surveys, Wiley Blackwell, vol. 30(3), pages 624-648, July.
  • Handle: RePEc:bla:jecsur:v:30:y:2016:i:3:p:624-648
    DOI: 10.1111/joes.12155
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    1. Doruk İriş & Sungwoo Im, & Hyeonggyun Ko, 2020. "Subjective Beliefs in International Agreements," Working Papers 2010, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).

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    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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