| Our work explores the impact of trade on the effectiveness of an IEA in a world of short-sighted, self-interested countries that live up to their bargains. We extend the participation game model to explicitly consider the impact of different international trade regimes. Compare autarkic and free trade regimes and address the following questions: (1) What is the source of recruitment problems? (2) Can trade liberalization overcome recruitment difficulties? (3) Is an IEA more or less effective under free trade? (4) In the presence of an IEA, does trade improve or worsen environmental quality?; For deeper insight, we decompose trade liberalization into three effects: the smoothing effect (price and consumption equalization); the level effect (increased aggregate consumption and production); and the leakage effect (a shift in production away from cleaner countries to dirtier countries), and analyze each in isolation.; Our analysis develops a novel analytical framework from which we argue that: Recruitment problems derive from signatories trying "too hard, too soon." That is, members of a small agreement abate so much that they are unable to increase their abatement efforts to reward the entrance of a new member.; Further, we are able to characterize the existence of a recruitment problem. In particular, we: (1) Identify sets of conditions under which a recruitment problem will exist, may exist and will not exist, generalizing existing results; (2) Identify states of the world in which a recruitment problem exists under autarky but not under free trade and show that the leakage effect expands this set of reversals.; Finally, we compare the effectiveness of an incomplete IEA under the two trade regimes. (1) For a specific example we show that, as compared to autarky, the leakage effect leads to a larger IEA with lower individual abatement targets, while conversely, the level effect leads to a smaller IEA with greater individual abatement targets. (2) Consequently, we characterize conditions under which an IEA is more (less) effective under free trade than under autarky. (3) Finally, we characterize conditions under which an IEA leads to greater (lesser) environmental quality under free trade than under autarky. |
