Transboundary Externalities and Property Rights: An International River Pollution Model

Tinbergen Institute Discussion Paper No. 12-006/1

40 Pages Posted: 21 Jan 2012  

Gerard van der Laan

VU University Amsterdam - Faculty of Economics and Business Administration; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Nigel Moes

VU University Amsterdam - Department of Econometrics and Operations Research; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: January 19, 2012

Abstract

In this paper we study international river pollution problems. We introduce a model in which the agents (countries) located along a river derive benefit while causing pollution, but also incur environmental costs of experiencing pollution from all upstream agents. We find that total pollution in the model decreases when the agents decide to cooperate. The resulting gain in social welfare can be distributed among the agents based on the property rights over the river. Using principles from international water law we suggest 'fair' ways of distributing the property rights and therefore the cooperative gain.

Keywords: international river, pollution, externality, property rights, value

JEL Classification: C70, D60, Q53

Suggested Citation

van der Laan, Gerard and Moes, Nigel, Transboundary Externalities and Property Rights: An International River Pollution Model (January 19, 2012). Tinbergen Institute Discussion Paper No. 12-006/1. Available at SSRN: https://ssrn.com/abstract=1988838 or http://dx.doi.org/10.2139/ssrn.1988838

Gerard Van der Laan (Contact Author)

VU University Amsterdam - Faculty of Economics and Business Administration ( email )

De Boelelaan 1105
Department of Econometrics and Tinbergen Institute
1081 HV Amsterdam
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Nigel Moes

VU University Amsterdam - Department of Econometrics and Operations Research ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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