Conconi, Paola and Perroni, Carlo (2003) Self-enforcing international agreements and domestic policy credibility. Working Paper. Coventry: University of Warwick. Centre for the Study of Globalisation and Regionalisation. (Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)).

Preview

PDF WRAP_Conconi_wp11403.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (359Kb)

Abstract

We explore the relationship between international policy coordination and domestic policy credibility when both must be self-supporting. Our arguments are presented in the context of a two-country, two-period model of dynamic emission abatement with transboundary pollution, where government policies suffer from a time-consistency problem. In the absence of repeated interaction, any form of coordination – between governments, and between governments and their respective private sectors – improves policy making. Nevertheless, under repeated interaction international policy spillovers can make it possible to overcome the domestic credibility problem; and, conversely, the inability to precommit to policy domestically can help support international policy cooperation.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HG Finance J Political Science > JZ International relations
Divisions:	Faculty of Social Sciences > Economics Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation
Library of Congress Subject Headings (LCSH):	International economic relations, International obligations, Game theory, Stochastic analysis, Intergovernmental tax relations
Series Name:	Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)
Publisher:	University of Warwick. Centre for the Study of Globalisation and Regionalisation
Place of Publication:	Coventry
Date:	July 2003
Number:	No.114
Number of Pages:	33
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Economic and Social Research Council (Great Britain) (ESRC), University of Warwick
References:	Abreu, D. (1988). “On the Theory of Infinitely Repeated Games with Discounting” Econometrica 56, 383-396. Bagwell, K., and R. Staiger (1997). “Multilateral Tariff Cooperation During the Formation of Regional Free Trade Areas,” International Economic Review 38, 291-319. Brunetti, A., G. Kisunko, and B. Weder (1998): “Credibility of Rules and Economic Growth: Evidence from a Worldwide Survey of the Private Sector,” World Bank Economic Review 12, 353-384. Cukierman, A. (1992). Central Bank strategy, credibility and independence: Theory and evidence, MIT Press, Cambridge, MA. Dixit, A. (1987). “Strategic Aspects of Trade Policy,” in Bewley, T. (ed.) Advances in economic theory: Fifth World Congress, Cambridge University Press, Cambridge, MA, 329-362. DRI (1992). Impact of a package of EC measures to control CO2 emissions on European industry, European Commission (DGXI). Ederington, J. (2001a) “International Coordination of Trade and Domestic Policies,” American Economic Review 91, 1580-1593. Ederington, J. (2001b) “Global Environmental Agreements and Trade Sanctions,” University of Miami, mimeo. Farrell, J., and E. Maskin (1989). “Renegotiation in Repeated Games,” Games and Economic Behavior 1, 327-360. Fudenberg, D., and J. Tirole (1996). Game theory, MIT Press, Cambridge, MA., and London, UK. Kehoe, P. (1989). “Policy Cooperation Among Benevolent Governments May Be Undesirable,” Review of Economic Studies 56, 289-296. Krugman, P. (1991). “Is Bilateralism Bad?” in Helpman, E., and A. Razin (eds.) International trade and trade policy, MIT Press, Cambridge, MA. Kydland, F., and E. Prescott (1977). “Rules Rather Than Discretion: The Inconsistency of Optimal Plans,” Journal of Political Economy 85, 473-491. Laffont, J.-J., and J. Tirole. (1996) “Pollution Permits and Environmental Innovation,” Journal of Public Economics 62, 127-140. Lodefalk, M., and J. Whalley (2002). “Reviewing Proposals for a World Environmental Organisation,” The World Economy 25, 601-617. Lucas, R., and N. Stokey (1983). “Optimal Fiscal and Monetary Policy is an Economy without Capital,” Journal of Monetary Economics 12, 53-93. Maggi, G. (1999). “The Role of Multilateral Institutions in International Trade Cooperation,” American Economic Review 89, 190-214. Matsuyama, K. (1990). “Perfect Equilibria in a Trade Liberalization Game,” American Economic Review 80, 480-492. Organisation for Economic Co-operation and Development (1995). Climate change, economic instruments and income distribution. OECD, Paris. Pearce, D., and E. Stacchetti (1997). “Time Consistent Taxation by a Government with Redistributive Goals,” Journal of Economic Theory 72, 282-385. Persson, T., and G. Tabellini (1994). Monetary and fiscal policy, Volume I: Credibility, MIT Press, Cambridge, MA. Poterba, J. (1991). “Tax Policy to Combat Global Warming: On Designing a Carbon Tax, ” in Dornbusch, R., and J.M. Poterba, (eds.), Global warming : Economic policy responses, MIT Press, Cambridge, MA. Rogoff, K. (1985a). “Can International Monetary Policy Cooperation Be Counterproductive?” Journal of International Economics 14, 199-217. Rogoff, K. (1985b). “The Optimal Degree of Commitment to an Intermediate Monetary Target,” Quarterly Journal of Economics 100, 1169-1190. Selten, R. (1975). “Reexamination of the Perfectness Concept for Equilibrium Points in Extensive Games,” International Journal of Game Theory 4, 22-55. Staiger, R.W. and G. Tabellini (1987). “Discretionary Trade Policy and Excessive Protection,” American Economic Review 77, 823-837. Stokey, N. (1989). “Reputation and Time Consistency,” American Economic Review, Papers and Proceedings 79, 134-139. Tornell, A. (1991). “On the Effectiveness of Made-to-Measure Protectionist Programs,” in Helpman. E., and A. Razin (eds.), International Trade and Trade Policy, MIT Press, Cambridge, MA. Van Damme, E. (1989). “Renegotiation-Proof Equilibria in Repeated Prisoners’ Dilemma,” Journal of Economic Theory 47, 206-217.
URI:	http://wrap.warwick.ac.uk/id/eprint/2005

Request changes to a record

Actions (login required)

View Item