Suchergebnisse

If a coalition of countries implements climate policies, nonparticipants tend to consume more, pollute more, and invest too little in renewable energy sources. In response, the coalition's equilibrium policy distorts trade and it is not time consistent. By adding a market for the right to exploit fossil fuel deposits, I show that these problems vanish and the first best is implemented. When the market for deposits clears, the coalition relies entirely on supply-side policies, which is simple to implement in practice. The result illustrates that efficiency can be obtained without Coasian negotiations ex post, if key inputs are tradable ex ante.

For two districts or countries that try to internalize externalities, I analyze a bargaining game under private information. I derive conditions for when it is efficient with uniform policies across regions—with and without side payments—and when it is efficient to prohibit side payments in the negotiations. While policy differentiation and side payments allow the policy to better reflect local conditions, they create conflicts between the regions and, thus, delay. The results also describe when political centralization outperforms decentralized cooperation, and they provide a theoretical foundation for the controversial "uniformity assumption" traditionally used by the fiscal federalism literature. (JEL C78, D72, D82, H77)

When making collektive desicions, principals (voters or districts) typically benefit by strategically delegating their bargaining and voting power to representatives different from themselves. There are conflicting views in the literature, however, of whether such a delegate should be conservative (status quo biased) or instead progressive relative to his principal. I show how the answer depends on the political system in general, and the majority requirement in particular. A larger majority requirement leads to conservative delegation, but sincere delegation is always achieved by the optimal voting rule.

For a club such as the European Union, an important question is when, and under which conditions, a subset of the members should be allowed to form inner clubs and enhance cooperation. Flexible cooperation allows members to participate if and only if they benefit, but it generates a freerider problem if potential members choose to opt out. The analysis shows that flexible cooperation is better if the heterogeneity is large and the externality small. The best possible symmetric and monotonic participation mechanism, however, is implemented by two thresholds: A mandatory and a minimum participation rule. Rigid and flexible cooperation are both special cases of this mechanism. For each of these thresholds, the optimum is characterized.

- ; A "majority rule" defines the number of club-members that must approve a policy proposed to replace the status quo. Since the majority rule thus dictates the extent to which winners must compensate losers, it also determines the incentives to invest in order to become a winner of anticipated projects. If the required majority is large, the members invest too little because of a hold-up problem, if it is small, the members invest too much in order to become a member of the majority coalition. To balance these opposing forces, the majority rule should increase in the level of minority protection (or enforcement capacity) and the project's value but decrease in the ex post heterogeneity. Strategic delegation turns out to be sincere exclusively under this majority rule. Externalities can be internalized by adjusting the rule. With heterogeneity in size or initial conditions, votes should be appropriately weighted or double majorities required. The analysis provides recommendations for Europe's future constitution. ; The Tore Browaldh Foundation and the Norwegian Research Council provided financial support.

- ; I analyse the negotiation between two countries, or regions, that are trying to make an agreement in order to internalize externalities. Local preferences are local information, but reluctance to participate in the agreement is signaled by delay. Conditions are derived for when it is efficient to restrict the attention to policies that are uniform across regions - with and without side payments - and when it is optimal to forbid side payments in the negotiations. While policy differentiation and side payments let the policy be tailed to local conditions, they create conflicts between the regions and thus delay. If political centralization implies uniformity, as is frequently assumed in the federalism literature, the results describe when centralization outperforms decentralized cooperation. But the results also provide a foundation for this uniformity assumption and characterize when it is likely to hold. ; Financial support from Jan Wallander's and Tom Hedelius' Foundation and the Norwegian Research Council

- ; This paper examines the incentives for political integration in a situation with a non-excludable public good. The model emphasizes inter-regional differences in sizes and preferences for the public good. In such a two-country model, Ellingsen (1998)1 characterizes the cases in which integration is an equilibrium. This paper includes a third region, and finds that a whole range of interesting and observable issues arise, which the two-country model is unable to capture. Depending on the relative differences in sizes and preferences among regions, the integration problem may be described as a prisoner's dilemma, a coordination game or as a hawk-dove game. Multiple equilibria may exist as well as equilibria with no integration; partly integration; conditionally integration and exclusion from the coalition. The extreme case where the public good is global (beneficial to all) is discussed, as well as an extreme where it is local (beneficial only to the closest neighbors).