Policies to Internalize Reciprocal International Spillovers

23 Pages Posted: 20 Jul 2007

See all articles by Martin Altemeyer-Bartscher

Martin Altemeyer-Bartscher

Chemnitz University of Technology (CUT)

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg

Eytan Sheshinski

Hebrew University of Jerusalem; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2007

Abstract

An effective policy scheme to overcome the suboptimal low provision levels of global public goods is developed in this paper. By suggesting a decentralized approach to raise environmental public good provision levels we take account of the lack of a coercive global authority that is able to enforce efficient international environmental regulations. In our model individual regions voluntarily commence international negotiations on public good provision, which are accompanied by side-payments. These side-payments are financed by means of regional externality-correcting taxes. Side-payments and national tax rates are designed in a mutually dependent way. The decentralized scheme we recommend for approaching Pareto efficient Nash equilibria is based on the ideas of Coasean negotiations and Pigouvian taxes. As it is implementable for a wide class of Nash solutions, it is applicable to various international externality problems.

Keywords: transfers, environmental taxation

JEL Classification: F35, H23

Suggested Citation

Altemeyer-Bartscher, Martin and Rübbelke, Dirk T. G. and Sheshinski, Eytan, Policies to Internalize Reciprocal International Spillovers (July 2007). CESifo Working Paper No. 2058. Available at SSRN: https://ssrn.com/abstract=1001662

Martin Altemeyer-Bartscher (Contact Author)

Chemnitz University of Technology (CUT) ( email )

Chemnitz
Germany

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg ( email )

Freiberg, 09599
Germany

Eytan Sheshinski

Hebrew University of Jerusalem ( email )

Department of Economics
Jerusalem 91905
Israel
972-2-588-3144 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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