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Government Failure: The Case of Global Environmental Mismanagement

  • Andersson, Thomas

    (Research Institute of Industrial Economics (IFN))

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    Pollution and polluters can move across national boundaries, but governments which seek to maximize social welfare should coordinate optimal environmental protection through transfer payments or commitments. However, governments may respond to political pressure rather than maximize social welfare, in case the environment is likely to be downgraded due to asymmetric costs, unborn generations, and asymmetries in information. Government failure in one country may reduce the optimal level of cleaning in another country. The findings are applied to atmospheric emissions, deforestation, consumption of tobacco, and the role of mu1tinational corporations. It is suggested that sustainable development should be supported through an international institution which compensates for government failure.

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    File URL: http://www.ifn.se/wfiles/wp/wp287.pdf
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    Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 287.

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    Length: 27 pages
    Date of creation: Dec 1990
    Date of revision:
    Handle: RePEc:hhs:iuiwop:0287
    Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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    Web page: http://www.ifn.se/
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    1. Hoel, M., 1989. "Global Environmental Problems: The Effects Of Unilateral Actions Taken By One Country," Memorandum 11/1989, Oslo University, Department of Economics.
    2. Gibbons, Robert, 1988. "Learning in Equilibrium Models of Arbitration," American Economic Review, American Economic Association, vol. 78(5), pages 896-912, December.
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