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The Decision to Link Trade Agreements to the Supply of Global Public Goods

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  • Scott Barrett
  • Astrid Dannenberg

Abstract

We use simple theory and an experiment to investigate the decision to link trade cooperation to the provision of a global public good like climate change mitigation. We examine and compare a unilateral approach, in which players decide independently and without commitment, and a multilateral approach, in which players decide by, and are committed through, an agreement. Our theory shows that, if players decide to link unilaterally, in a best case linkage is a coordination game in which equilibrium selection is unreliable. By contrast, if players decide to link multilaterally, selection in this best case is assured by specifying an appropriate participation threshold for the linked agreement to enter into force. Our experimental results confirm the superiority of the multilateral approach and reveal additionally that agreement by a majority coupled with commitment by this majority are required for its success.

Suggested Citation

  • Scott Barrett & Astrid Dannenberg, 2022. "The Decision to Link Trade Agreements to the Supply of Global Public Goods," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(2), pages 273-305.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/716902
    DOI: 10.1086/716902
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    Cited by:

    1. Felbermayr, Gabriel & Peterson, Sonja & Wanner, Joschka, 2022. "The impact of trade and trade policy on the environment and the climate: A review," Kiel Working Papers 2233, Kiel Institute for the World Economy (IfW Kiel).
    2. Alt, Marius & Gallier, Carlo & Kesternich, Martin & Sturm, Bodo, 2023. "Collective minimum contributions to counteract the ratchet effect in the voluntary provision of public goods," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    3. Geng Qin & Hanzhi Yu, 2023. "Rescuing the Paris Agreement: Improving the Global Experimentalist Governance by Reclassifying Countries," Sustainability, MDPI, vol. 15(4), pages 1-19, February.
    4. Andres, Pia, 2023. "Industrial policy and global public goods provision: rethinking the environmental trade agreement," LSE Research Online Documents on Economics 117899, London School of Economics and Political Science, LSE Library.
    5. Scott Barrett, 2022. "A Biodiversity Hotspots Treaty: The Road not Taken," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(4), pages 937-954, December.
    6. Andres, Pia, 2023. "Industrial policy and global public goods provision: rethinking the environmental trade agreement," LSE Research Online Documents on Economics 117900, London School of Economics and Political Science, LSE Library.

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