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Risk pooling in redistributive agreements

Author

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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

    as
    1. Effrosyni Diamantoudi & Eftichios S. Sartzetakis, 2006. "Stable International Environmental Agreements: An Analytical Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(2), pages 247-263, May.
    2. Derek J. Clark & Kai A. Konrad, 2007. "Contests with Multi-tasking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 303-319, June.
    3. BĂ©atrice Roussillon & Paul Schweinzer, 2010. "Efficient emissions reduction," The School of Economics Discussion Paper Series 1004, Economics, The University of Manchester.
    4. Wildasin, David E, 1995. " Factor Mobility, Risk and Redistribution in the Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 527-546, December.
    5. Maria Arbatskaya & Hugo Mialon, 2005. "Two-activity Contests," Emory Economics 0527, Department of Economics, Emory University (Atlanta).
    6. James Banks & Richard Blundell & Agar Brugiavini, 2001. "Risk Pooling, Precautionary Saving and Consumption Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 757-779.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agreements; Risk-pooling; Contests.;

    JEL classification:

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

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