Abstract
This paper emphasizes the value of jointly addressing environmental and development objectives. We consider one altruistic developed country and several heterogeneous developing countries. We demonstrate that the lack of coordination between countries in tackling climate change finds a simple solution if developing countries can expect to receive development aid transfers from the developed country. The timing of the decision is central to the mechanism: development aid transfers should be determined after pollution abatement levels. The main restriction of our result is that it only holds if the developed country is altruistic enough to make positive development aid transfers to developing countries. Nevertheless, even from a purely selfish point of view, it may be profitable for the developed country to be more altruistic, leading to higher welfare for all countries.
Highlights
In a world of rising inequalities and climate change, development and environmental policies are of crucial importance and represent a major challenge for governmental and international institutions
In the United States, development and environmental affairs are delegated to two powerful independent agencies, the US Agency for International Development and the Environmental Protection Agency
This paper shows that the coordination problem finds a simple solution if developing countries can expect to receive development aid transfers from the developed country
Summary
In a world of rising inequalities and climate change, development and environmental policies are of crucial importance and represent a major challenge for governmental and international institutions. Once the endogeneity of development aid transfers is properly taken into account, the best strategy for the developing countries is to abate exactly the socially optimal level. The developing countries will anticipate that they will receive no aid and will tend to reduce their efforts This restriction relates to a serious problem in today’s world where key players are increasingly inclined to reduce their transfers to developing countries. The current paper contributes to several strands of literature such as development economics with altruistic transfers (for instance, Azam and Laffont (2003) and Svensson (2000)) and environmental economics on multilateral externalities and international agreements (for instance, Barrett (2001), Helm and Wirl (2014, 2016) and Martimort and Sand-Zantman (2016)).
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
