United we stand, divided we win. Strategic decentralization and the provision of global public goods
12:00 - 13:30
This paper is co-authored by Renaud Foucarty and Cheng Wan.
This paper studies strategic decentralization in the provision of global public goods. It is well known that cooperation between countries can improve total provision. However, we show that a coalition, with the aim of maximizing the aggregate payoff of its members, may find it strategically advantageous to decentralize its provision, so that members act autonomously to maximize their own payoff. This counter-intuitive phenomenon occurs with the presence of multiple coalitions. Whether it is beneficial for a coalition to decentralize depends on the nature of its opponents. A strategic decentralization is always done at the cost of reducing aggregate provision of the global public good. Several examples are presented. In particular, we find that a multipolar world with two active coalitions may provide less public goods than a world with only the largest coalition and a group of free-riding countries.