Strategic delegation when public inputs for a global good are imperfect substitutes

Yukihiro Nishimura, Kimiko Terai

Research output: Contribution to journalArticle

Abstract

This paper explores the outcome of non-cooperative decision making by elected politicians under transnational externalities. In each country, the delegate (the government) is elected by means of majority voting. Thereafter, delegates of each country choose their environmental policy, which becomes a public input to the global common good. In equilibrium, the median voter deliberately elects a delegate whose preferences differ from his/her own, to pursue advantages in international decision making. In this paper we use the social composition function to capture various cases of environmental problems with complementarity (imperfect substitutability). Our analysis shows the following results: with sufficient complementarity of the public inputs, strategic delegation can lead to the delegation of decisions to a “greener” politician. However, with almost perfect substitutability of public inputs, the only equilibria may involve asymmetric provision of public inputs to the global common good, even if the countries are identical.

Original languageEnglish
Pages (from-to)1-16
Number of pages16
JournalInternational Tax and Public Finance
DOIs
Publication statusAccepted/In press - 2016 Jun 18

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Keywords

  • Complementarity
  • Environmental policy
  • Strategic delegation
  • Transnational externalities

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

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