International Environmental Agreement Formation and Trade

Abstract

This paper examines self-enforcing International Environmental Agreements (IEAs) in an open economy environment. Using an extended model of Barrett (1994), we show that: (i) equilibrium tariff is positive; (ii) the endogenously determined size and the effectiveness of an multilateral IEA are the tradeoff of four effects, i.e. entry effect, level effect, leakage effect, and tariff effect. The paper also offers an alternative explanation for the minimum participation clause adopted by most IEAs that is consistent with the mandate of an IEA.

JEL Classifications:

• H41
• Q20
• F12

Keywords:

• IEA
• trade
• leakage