International Agreements, Economic Sovereignty and Exit

29 Pages Posted: 17 May 2018

See all articles by Martin Richardson

Martin Richardson

Australian National University (ANU) - Faculty of Economics & Commerce

Frank Stähler

University of Tuebingen - Department of Economics; University of Adelaide - School of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 14, 2018

Abstract

We develop a model in which it is uncertainty about the future domestic policy environment that both makes international cooperation attractive and induces the possibility of a nation reneging on such an international agreement. We show, in a fairly general setting in which the likelihood of exit is affected by the degree of cooperation, that the possibility of exit reduces the optimal degree of initial cooperation. “Full” cooperation will never be optimal, and the optimal degree of cooperation will never be such as to “squeeze out” any possibility of exit. However, an increase in global uncertainty may imply an increase in cooperation when exit risks are already large to begin with.

Keywords: international agreements, international cooperation, exit, sovereignty

JEL Classification: F020, F130, F510, F530

Suggested Citation

Richardson, Martin and Stähler, Frank, International Agreements, Economic Sovereignty and Exit (March 14, 2018). CESifo Working Paper Series No. 6941, Available at SSRN: https://ssrn.com/abstract=3178553

Martin Richardson

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia

Frank Stähler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

HOME PAGE: http://www.frank-staehler.de

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
22
Abstract Views
307
PlumX Metrics