International cooperation for sale

Abstract

This paper shows that strong asymmetry among countries warrants a change in the rules of the game of global public goods provision, with the consequence that cooperation by some countries is bought by others and aggregate welfare is increased, perhaps substantially. Side payments on their own have virtually no effect on the outcomes that can be sustained by self-enforcing cooperative agreements. But when the rules of the game are changed by strong asymmetry – when some countries are effectively ‘committed’ to being non-signatories to an agreement eschewing money transfers – side payments become the vehicle for increasing participation in a cooperative agreement.