Competitiveness and environmental policies in strategic environmental policy models

This paper discusses the issue of competitiveness and environmental regulation from the viewpoint of strategic environmental policy models. It demonstrates that the incentive for strategic policies is determined only by the reaction of the opponent. Furthermore, it shows that the conditions under which relatively strict environmental policies may lead to an increase in the profits of the domestic industry are rather artificial. The result depends in a rather complex way on the type of competition and several effects of research and development or environmental quality specification, and on the assumption that a unilateral policy is possible.

Competitiveness and environmental policies in a dynamic model

This paper discusses the issue of competitiveness and environmental regulation in a dynamic framework. It presents an example and a general model. It is shown that the dynamic framework cannot lend general support to the hypothesis that strict environmental policies result in an increase in competitiveness. Instead, the paper shows that the dynamization of the model adds further ambiguity to the results of the static models as they were discussed in Stahler (1998).

Optimal transfer policies

This paper discusses the role of transfers in a non-cooperative environment. If reselling in-kind-transfers involves some retrading costs, in-kind transfers are supposed to realise at least some of the mutual bargaining gains which would be left unexploited by mere use of monetary payments. These retrading costs bias the recipient's consumption plans in favour of the donor. However, the paper shows that non-enforceability alone does not support the exclusive application of inkind transfers in general because income effects can leave some scope for monetary transfers. The results of the model are discussed for some applications.In-kind transfers,monetary transfers,optimal policies

Bargaining in a long-term relationship and the Rubinstein solution

In a recent paper, Muthoo (1995) discusses whether the Rubinstein solution carries over on repeated bargaining situations. He concludes that stationary equilibria for such a repeated bargaining game do not imply the Rubinstein solution and that several non-stationary equilibria may exist. This paper demonstrates that the Rubinstein solution applies not only to unique bargaining problems but to repeated bargaining problems as well. It demonstrates that stationarity holds also in Muthoo's model, and it shows that a certain result of Muthoo which makes the split of bargaining gains independent of the discount factors is no relevant case as the discounted sum of each agent's utility is infinite. The paper introduces an alternative approach which takes into account that offers may cover also future realizations by employing future contracts. It shows that the agreement depends crucially on the enforceability of contracts if bargaining behavior fulfils a rationality condition.Strategic bargaining,repeated games,rational bargaining behavior

The market entry paradox

This paper discusses a simultaneous market entry game between two firms with different fixed costs. This case is a typical application of mixed strategy equilibria. Conventional wisdom would suggest that the low-cost firm is more likely to enter the market. This presumption is wrong. Instead, the paper demonstrates a market entry paradox: the equilibrium probability of entry is higher for the high-cost firm than the equilibrium probability of entry of the low-cost firm.Market entry,mixed strategy equilibrium

Pareto improvements by in-kind-transfers

This paper shows that in-kind-transfers are an effective instrument to stabilize agreements when compliance cannot be guaranteed. It demonstrates the weak superiority of in-kind-transfers for a unilateral relationship between two agents. In particular, it proves that, under conditions of perfect knowledge and necessary selfenforcement of contracts, both agents are at least not worse off by in-kind-transfers compared to monetary payments when no selfenforcing contract exists which,is based on monetary payments. This result holds for finitely and for infinitely repeated games.

Some reflections on multilateral environmental agreements

In an international setting, sovereignty of countries imposes serious problems on compliance and participation for a multilateral environmental agreement. This paper discusses both problems simultaneously in a three-country-setting. It employs a repeated-game-model and develops some basic conditions which agreements must meet. These conditions are applied on a specific model which allows only a subcoalition of two countries to join an agreement. However, this subcoalition is able to introduce transfer policies which initiate extra reductions of the outsider country. The paper shows that transfer policies may be based on a cost-inferior technology which makes non-compliance less attractive.

On the economics of international environmental agreements

This paper demonstrates that partial cooperation with respect to the use of an international environmental resource can emerge when countries are able to opt to breach an agreement. Although the option of non-compliance restricts the set of coalitions on those which embrace merely two members, broader cooperation can emerge when these two countries compensate a third country for extra reduction efforts. The paper discusses also a reversible and- a irreversible technology option and demonstrates that compensating a third country for the introduction of an irreversible technology may be even advantageous for the donors when this technology incurs higher costs than a reversible one.

Unemployment and employment protection in a unionized economy with search frictions

In theoretical literature, the effects of employment protection on unemployment are ambiguous. Higher employment protection decreases job creation as well as job destruction. However, in most models, wages are bargained individually between workers and firms. Using a conventional matching model in which a monopoly union sets wages, I show that employment protection can unambiguously increase unemployment. Interestingly, I find that tightening the restrictions on redundancies and dismissals may even increase the probability of dismissal. --employment protection,search and matching models,unemployment,unions

Taxing deficits to restrain government spending and foster capital accumulation

In a dynamic model of fiscal policy, social polarization provokes a deficit bias. Policy advisors have recently proposed that governments running a deficit should be forced to generate additional tax revenue. We show that this deficit taxation reduces the deficit bias as it internalizes the externality different lobby groups impose on others. The mechanism described here is not due to the political risk of being elected out of office because the private sector dislikes taxation. Lower government spending and the resulting reduced deficit bias augment capital accumulation. --fiscal rules,deficit taxation,polarization,capital accumulation