Emergence of Asymmetric Solutions in the Abatement Game

This paper explores the outcome of non-cooperative decision making by elected politicians under transnational externalities. We re-examine the extent of a voter’s incentives for supporting politicians who are less green than the median voter, a phenomenon called “political race to the bottom.” We provide a setup in which each country is endowed with the fixed amount of endowment available for consumption, and the part of the endowments can be used for improvement of the environment. When the degree of spillovers of public inputs becomes strong enough, there arises the following equilibrium: one of the elected politicians pays no attention to the environment, but the median voter becomes the elected politician in the other country. This equilibrium is different from the model by Buchholz et al. (2005, “International Environmental Agreements and Strategic Voting”, Scandinavian Journal of Economics 107(1), 175-195), in which countries can choose emissions without an upper bound.