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Take one or more at a time? Issue linkage versus ringfencing with common shocks

Author

Listed:
  • Frank Stähler

    (University of Tübingen, CESifo and NoCeT)

  • Sophia Vaaßen

    (University of Tübingen)

Abstract

Countries cooperate on certain issues like trade and environmental policies through international agreements. These agreements can be comprehensive and cover several issues (issue linkage) or deal with issues separately (ringfencing). A sovereign country experiencing a negative shock may want to withdraw from an agreement even if its exit harms other countries. Under ringfencing, each issue is subject to a separate agreement, and this agreement is terminated if one country has a bad outcome. Under issue linkage, the agreement is only terminated if one country has a bad realization for both issues. Common shocks make ringfencing relatively more attractive since they increase (decrease) the probabilities for all cases in which ringfencing (issue linkage) is the preferred mode of cooperation.

Suggested Citation

  • Frank Stähler & Sophia Vaaßen, 2025. "Take one or more at a time? Issue linkage versus ringfencing with common shocks," Economics Bulletin, AccessEcon, vol. 45(1), pages 288-299.
    • Handle: RePEc:ebl:ecbull:eb-23-00151
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    File URL: http://www.accessecon.com/Pubs/EB/2025/Volume45/EB-25-V45-I1-P27.pdf
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    More about this item

    Keywords

    issue linkage; ringfencing; common shocks; international agreements; exit;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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