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11 - Asymmetrical cooperation in economic assistance
- Edited by I. William Zartman, The Johns Hopkins University, Saadia Touval, The Johns Hopkins University
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- Book:
- International Cooperation
- Published online:
- 05 June 2012
- Print publication:
- 03 June 2010, pp 208-226
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Summary
This chapter is about asymmetrical cooperation, as seen in typical foreign aid or official development assistance (ODA), and about the way in which interests rather than reciprocity foster cooperation. It contrasts the effects of proximate (specific) interests and distant (altruistic or general) interests in the choice of bilateral versus multilateral aid recipients, each providing a different basis of cooperation that fits the particular characteristics of the chosen aid recipients. Thus it takes apart the argument that asymmetrical cooperation only serves the stronger party, showing instead that a balance of diverse interests (Udalov 1995) underlies different types of asymmetrical cooperation, much as different values have been shown to constitute the basis of a successful negotiated agreement (Homans 1961; Nash 1950). Thus durable cooperation can come from repeated, matched asymmetrical exchanges, that in turn form the basis of justifying norms that stabilize the instances of cooperation.
The starting point of this chapter, which may appear to be far from these conclusions, is found in the debate opened by the World Bank (Burnside and Dollar 2000, p. 854) on aid efficiency. Its finding was the absence of any “significant tendency for total aid or bilateral aid to favor good policy. On the other hand, aid that is managed multilaterally (about one-third of the total) is allocated in favor of good policy.” Burnside and Dollar interpreted bilateral aid allocation decisions as the consequence of a bias toward the self-interest of donors – in particular their geopolitical interests – while multilateral institutions would be more motivated by the needs and merits of potential recipients, and therefore would allocate their development assistance more efficiently.
Discussion
- Edited by Ian Goldin, The World Bank, L. Alan Winters, University of Birmingham
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- Book:
- The Economics of Sustainable Development
- Published online:
- 04 August 2010
- Print publication:
- 24 February 1995, pp 302-306
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Summary
An important issue at the nexus of environmental and trade policies concerns the negative impact that an environment protection policy could have on a nation's welfare, through lessening its competitiveness and consequently the level of its economic activity. Then, in a noncooperative game, all countries will tend to adopt lax environmental policies, for fear of losing industrial competitiveness and employment to other countries. We have here a classic example of suboptimal Nash equilibrium; here, noncooperation among actors leads to excessive pollution. The argument is of course reinforced if one introduces transfrontier pollution, which obviously needs to be taken into account within an international coordination framework.
Kanbur, Keen and van Wijnbergen's chapter 11 (hereafter KKW) provides an elegant illustration of this issue, based on a simple two-country model. Their model assumes that each country maximises a utility function depending positively on income provided by economic activity (profit taxes collected by the government in the KKW framework) and negatively on pollution, which is a result of economic activity itself.
There is nothing new in the result that the Nash equilibrium of the game considered is suboptimal. It is defined as the crossing point of two rising reaction curves, defined in terms of pollutant emission (d and D). These reaction curves result classically from utility maximisation, with isoutility curves, of the home countries represented as in figure D11.1. In such a context, it is clear that the noncooperative Nash equilibrium is suboptimal.
The model presented by KKW has, however, an original feature, because they introduce an asymmetry among the two countries.