Power Rivalry and Failures in International Cooperation

We study the consequences of power rivalry among countries on the voluntary provision of global public goods. We show that rising prosperity and decreasing inequality between countries do not necessarily lead to an increase in public good provision. Depending upon the characteristics of the public good, either a sole hegemon or a group of hegemonic states emerge as contributors to the public good in equilibrium. The equilibrium total amount of the public good may go down when the assets of countries increase equally, as hegemonic states reduce contributions because they lose relative power. Decreasing between-country inequality in assets can have the same effect. Further, increasing heterogeneity in valuations of the public good increases public good contributions, but may lower overall welfare. Our results show how recent shifts in global economic order may explain the current decline in provision of global public goods such as climate change mitigation, international peacekeeping efforts, and global foreign aid.