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Self-Enforcing International Agreements and Domestic Policy Credibility

Paola Conconi and Carlo Perrone

CSGR Working Paper No. 114/03

July 2003



We explore the relationship between international policy coordination and domestic policy credibility when both must be self-supporting. Our arguments are presented in the context of a two-country, two-period model of dynamic emission abatement with transboundary pollution, where government policies suffer from a time-consistency problem. In the absence of repeated interaction, any form of coordination – between governments, and between governments and their respective private sectors – improves policy making. Nevertheless, under repeated interaction international policy spillovers can make it possible to overcome the domestic credibility problem; and, conversely, the inability to precommit to policy domestically can help support international policy cooperation.

Keywords: Policy Commitment, Self-Enforcing International Agreements.

Address for correspondence:

University of Warwick and ECARES, Université Libre de Bruxelles
Tel: 32 (0)2 6502345
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