Risk pooling in redistributive agreements
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.
|Date of creation:||Jul 2012|
|Date of revision:|
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- Effrosyni Diamantoudi & Eftichios S. Sartzetakis, 2001.
"Stable International Environmental Agreements: An Analytical Approach,"
04001, Concordia University, Department of Economics, revised Feb 2003.
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22095, University of Munich, Department of Economics.
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- Clark, Derek & Konrad, Kai A., 2006.
"Contests with multi-tasking
[Contests with Multi-Tasking]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-14, Social Science Research Center Berlin (WZB).
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"Risk Pooling, Precautionary Saving and Consumption Growth,"
Review of Economic Studies,
Oxford University Press, vol. 68(4), pages 757-779.
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- Béatrice Roussillon & Paul Schweinzer, 2010. "Efficient emissions reduction," The School of Economics Discussion Paper Series 1004, Economics, The University of Manchester.
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