World Bank – Development Economics Research Group – PFCplus Research
CIRED, International Research Center on Environment & Development, France
World Bank Policy Research Working Paper No. 3180
Lecocq and Hourcade examine the normative aspects of sharing the costs of providing global and long-term public goods between poor and rich countries. In a one-period optimization model, who provides public goods strictly depends on whether or not individual weights in the planner’s welfare function are based on initial endowments. But with long-term public goods, banning wealth redistribution at first period still allows for several equilibriums depending on parties’ willingness to acknowledge changes in negotiating powers over time, and on whether they care only for their own descendants. The authors show that «adaptative» and «universal» mandates lead to far more robust equilibrium. In all cases, a simple rule of thumb for allocating expenditures at first period emerges, independent of both the optimal level of public goods and the second-period distribution of expenditures.