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Swap Bonds or Stocks, or Balance Trade! A Game of Implicit Environmental Policy

Author

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  • Hagen Schwerin

    () (ETH Zurich, Switzerland)

Abstract

This paper develops a mechanism to correct production externalities between several parties, such as externalities motivating environmental policy between countries, using asset ownership. Efficiency can be obtained if each party retains less than the full share of their own gain from resource use materialized in gross product. The remainder of the product can be earned by other parties - in a reciprocal way. The resulting swaps can be enforced by using bonds or stocks or with balanced trade of shares, hindering free-riding. The best international climate policy thus may be swap contracts.

Suggested Citation

  • Hagen Schwerin, 2018. "Swap Bonds or Stocks, or Balance Trade! A Game of Implicit Environmental Policy," CER-ETH Economics working paper series 18/293, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  • Handle: RePEc:eth:wpswif:18-293
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    File URL: https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-18-293.pdf
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    More about this item

    Keywords

    Free-rider behavior; Privately provided public good; Lindahl prices; Property rights; Climate agreement; General equilibrium.;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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