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Risk pooling in redistributive agreements

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  • Bos, O
  • P. Schweinzer

Abstract

We study redistributive agreements designed collectively by individual and independent states for the joint supply of a public good. We specifically model the case of international environmental agreements but our analysis should be equally applicable to other multinational arrangements with redistributive aspects. The basic intuition of the investigated class of mechanisms is that, if part of member GDP is redistributed, then the redistributive resource has lower variance than individual income: a side effect of redistribution is risk-sharing. If, in addition, the sum of contributed parts of individual GDP forms a contest prize pool which returns the contributions as prizes to the participants depending on a relative ranking of public good provision levels, then the mechanism can also implement efficient efforts.

Suggested Citation

  • Bos, O & P. Schweinzer, 2012. "Risk pooling in redistributive agreements," Discussion Papers 12/17, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:12/17
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    References listed on IDEAS

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    More about this item

    Keywords

    Agreements; Risk-pooling; Contests.;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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