Consumption externalities and the effects of international income transfers on the global environment

Vol. 68 (1998), No. 3, pp. 255-269 Journal of Economics Zeitschrift f~ir Nat ional6konomie

�9 Springer-Verlag 1998 - Printed in Austria

Consumption Externalities and the Effects of International Income Transfers

on the Global Environment

Tetsuo Ono

Received November 1 l, 1997; revised version received August 14, 1998

In this paper, we extend the standard model of private provision of public goods by including consumption externalities to characterize a situation in which economic activities pollute the environment. We consider a case in which there are an industrial country which can afford to invest in the environment and a developing country which cannot. Then, we show that international income transfers in both directions can improve the global environmental quality as well as the welfare of each country. We also show that the results have important implications for policies such as official development assistance or the assignment of tradable emission permits.

Keywords: consumption externalities, international income transfers, private provision of public goods.

JEL classification: H23, H41.

1 Introduction

In recent years, there has been an increase in the awareness of global environmental issues, such as CO2 emission, ozone-layer depletion, acid rain, and so on. This is transboundary pollution in the sense that an economic activity in one country affects people in other countries. For example, OECD countries currently and historically contribute much to CO2 emissions, and not only people in these countries but also those in other countries now suffer from the global warming caused by the concentration of CO2 in the atmosphere. In the case of ozone-layer depletion, the release of chlorofluorocarbons by industrial countries thins the ozone shield that protects people all over the world from harmful ultraviolet radiation. These examples imply that it is necessary to

256 T. Ono

implement an international cooperation program to control the global spread of pollution.

The need for international cooperation has been discussed on several occasions. At the 1992 Congress in Rio de Janeiro (United Nations Conference on Environment and Development), an international cooperation program was agreed upon in response to the environmental deterioration caused by economic development. At the 1997 Congress in Kyoto (3rd Conference of the Parties to the United Nations Frame- work Convention on Climate Change), quotas of CO2 emissions were assigned to each country to regulate the aggregate CO2 emissions on the earth. A total understanding among countries, however, is difficult as shown by the conflicts at the Kyoto Congress. European countries insisted on a strict regulation of CO2 emissions, whereas most developing countries opposed the proposal since the regulation would impede their economic development.

One of the main reasons of the conflict over the environmental policies is that economic conditions in each country vary tremendously. Industrial countries have sufficient income to invest in the environment so that they can argue in favor of the regulation of emissions harmful to the environment. Moreover, they can use highly advanced technologies in industry which help protect the environment in an efficient way. On the other hand, developing countries cannot afford to invest in the environment. In addition, their industrial technologies are not as advanced as those of industrial countries so that their abatement activities are not efficient. These differences between industrial and developing countries lead to difficulties in cooperation for the protection of the global environment.

Considering the above differences, this paper suggests that one way to curtail the differences is to redistribute income among countries. A transfer to developing countries which do not protect the environment would induce them to do so. This would result in the improvement of the global environment. On the other hand, a transfer to industrial countries with effective abatement technologies would increase the ef- ficiency of reducing pollution.

The purpose of this paper is to consider international income transfers among countries as an environmental policy for the global environmental preservation, and to examine the effects of the transfers on the global environmental quality and the welfare of countries. We show the conditions under which such transfers lead to the improvement of the global environmental quality and of welfare. Moreover, we show the implications of the results for international environmental policies.

In order to carry out the above analysis, we utilize a model of private provision of public goods so as to characterize a situation in which each

Consumption Externalities 257

country behaves noncooperatively concerning maintenance activities for the environment. Along the lines of Warr (1983) and Bergstrom et al. (1986), we develop the model in which each country spends part of its income for its own consumption and voluntarily provides the rest to the commonly consumed good, the global environment.1 In this paper, we modify the standard model by including consumption externalities such that consumption decreases the global environmental quality. This modification reflects the situation in which (1) CO2 emissions and acid rain are by-products of economic activities, i.e., consumption, and (2) the environmentally harmful activity of one country affects the other countries through the global environment.

Within the above framework, we consider a two-country model: an industrial country and a developing country. The former is a contributor in the sense that it invests part of its income in the environment and the latter is a noncontributor in the sense that it does not invest. We consider international income transfers between these two countries. The noteworthy features of our analysis are twofold. First, we analyze the effects of international transfers on the global environmental quality in the presence of consumption externalities. Bergstrom et al. (1986) examine the effects of transfers on a commonly consumed good, a public good, in the presence of noncontributors, while Buchholz and Konrad (1995) and Ihori (1996) examine the effects in the presence of contribution-productivity differentials. However, they do not take into account consumption externalities in their models. Secondly, we examine the effects of transfers on the welfare of each country in the presence of a noncontributor. Ihori (1996) and Niho (1996a) perform welfare analyses in two-country models, but they focus on the case in which both countries are contributors.

The results are twofold. First, a transfer from the contributor to the noncontributor can increase the global environmental quality and welfare of each country, if the noncontributor is induced to invest in the environment. However, if the noncontributor still chooses not to invest in the environment, then the global environmental quality and welfare of a contributor will decrease. This result implies that the international transfer from an industrial country to a developing country,

1 Buchholz and Konrad (1995) and Ihori (1996) indicate the possibility of applying a standard model of private provision of public goods to the analysis of international environmental issues. Buchholz and Konrad (1994) and Stran- lund (1996) really apply the model for analyzing those issues. Murdoch and Sandier (1997) empirically support the suitability of the model for analyzing international environmental issues in the case of cutbacks in chlorofluorocarbons emissions.

258 T. Ono

like ODA (official development assistance), should be linked to the recipient country carrying out environment-protection activities.

The second finding is that the transfer from the noncontributor to the contributor improves global environmental quality. Moreover, both countries are made better off by this transfer if the contributor has a more efficient technology for environmental maintenance relative to that of the noncontributor. The result implies that quotas of emissions (i.e., consumption in our model) should be assigned to contributing countries rather than to noncontributing countries. The introduction of a market of tradable emission permits would result in an income redistribution from noncontributing countries to contributing countries since the noncontributing countries would purchase emission permits from the contributing countries in order to satisfy their needs for consumption. Thus, it results in the improvement of the global environmental quality as well as of the welfare of each country.

The organization of this paper is as follows. Section 2 develops the model. Section 3 characterizes the equilibrium. Section 4 analyzes the effects of international transfers and shows the main results. Section 5 concludes the paper.

2 The Model

We consider a model with two countries I (an industrial country) and D (a developing country). Country i (i = I, D) has w i E IR++ units of endowment and divides them between consumption, c i , and maintenance investment for the environment, m i. Country i is characterized by the utility function U i = u i ( c i , E ) defined over nonnegative consumption c i and the global environmental quality E.

Assumption." ui: ~t~ 2 "-~ R is strictly increasing, strictly concave, and

twice continuously differentiable with " i i h m c i _ _ , O U l ( C , E) = cxz for E > 0 and lime~0 uig(c i, E) = cx~ for c i > 0 . 2

The global environmental quality is assumed to be an international public good which is deteriorated by consumption but can be improved

2 For a function u i, denote u] (u~) as the first derivative of u i with respect to c i ( E ) .


by maintenance investment. We formulate this mechanism as

E : E O - Z fli c i a t- Z y i m i , ( l )

i i

where E0 > 0 is the initial environmental quality, /~i is the parameter of consumption externalities, and y i is the parameter of contribution productivity of maintenance investment. Consumption externalities are introduced to characterize a situation in which wastes and emission from economic activities degrade the global environmental quality. 3

Define E -i ~ Eo - ~ J c J "3U y J m ), j ~ i. Then, the utility-maximization problem of country i is: max{cg,E,mi } u i ( c i , E) , s.t. C i q -m i = W i ,

E = E - i - - f l ici q- y i m i , m i > O, where E - i is given.

3 Equilibrium

Each country maximizes its utility taking as given the other country's consumption and maintenance investment. Therefore, we can define a Nash equilibrium as follows.

Definit ion: A Nash equilibrium is a pair of maintenance investments {rh I, rh D } such that, for each i, F~/i solves max u i (w i - - f f l i , E - i - - • iw i -~ (t~ i -+- yi)ff ' li), s.t. #/i > 0, w h e r e E - i = Eo - flJlld j -q- (flJ q- yJ) f f l j , j ~fi i, is given.

In what follows, we solve the utility-maximization problem and de- rive a Nash reaction function. Then, we characterize a Nash equilibrium.

We first solve the problem by ignoring the inequality constraint m i _> 0. The first-order conditions are

i i i i i U l (C , E ) = (fli + y ) u 2 ( C , E ) ,

E = E - i + y i w i - (fli _]_ ~ i )c i .

(2)

(3)

3 Note that the model reduces to a standard model of private provision of public goods with contribution-productivity differentials by assuming E0 = 0 and fii = 0 (see Buchholz and Konrad, 1995; Ihori, 1996). Since we formulate the environmental equation with consumption externalities as (1), we assume E o - Y~i~LDI fli w i > 0 in order to have an equilibrium in which both countries do not invest in the environment.

260 T. Ono

Equation (2) is the income expansion path which corresponds to the marginal rate of substitution between consumption and the global environmental quality, (fli + yi). Equation (3) is the reduced form of con- straints. If m i > 0, the constraint line is tangent to the indifference curve at the utility-maximization point in c i - E space. Since (2) implicitly defines c i as a function of E, we can rewrite it as

C i = ~9 i ( E ) , (4)

where ~bi: •++ ~ I~++ is strictly increasing. Combining (3) and (4), we have

E 4- (fli 4- y i ) f b i ( E ) = E - i -F )" iwi �9 (5)

Let F i ( E ) denote the left-hand side of (5), where d F i ( E ) / d E > 1 for all E > 0. We can rewrite (5) as

E = f i ( E - i + y i w i ) , (6)

where f i -1 =-- f i . Note that f i : R++ ~ R++ is strictly increasing

with 0 < f i t ( . ) < 1. We assume that f i is continuously differentiable. Taking the inequality constraint m i >_ 0 into account, we have

E = m a x { f i ( E - i + y i w i ) , E - i - ~ i c i } . (7)

When E = E - i -- ~ i c i , country i chooses m i = 0 which implies c i = w i. Thus, (7) is rewritten as

E = m a x { f i ( E - i q- ~,'itoi), E - i -- ~ i t o i } . (8)

This is the demand function of country i for global environment. Subtracting E - i -- [~itoi from each side of (8) and dividing both

sides by fli § yi , we obtain country i ' s optimal response:

1 m i = max[fl i + y i f i ( E ~ - f i j w j + ( f i j + Y J ) m J -~- y i t o i )

1 f i j w j fli q_ y i {E0 - + (flJ -1- y J ) m j - f i i w i } , O] . (9)

The equilibrium is characterized by a point in which each optimal- response curve crosses in the m I - m D space. Since the existence of a unique Nash equilibrium can be shown by applying the result found in Bergstrom et al. (1986) and Buchholz and Konrad (1995), we assume it in the following.


The equilibrium global environmental quality, /~, is characterized as follows;

F , : E o - y ~ f l i w i if rhi = 0, i = I , D , (10) i

-~- (t~ i ~- ]/i)(gi(E) : Eo - t3Jw j + ~/iwi

i f rh ~ > O, NJ = 0 (i r j ) , (11)

..~ Z ( t ~ i jr },i)~)i(~_~) : Eo + Z )/ito i i i

i f rn i > 0 , i = I , D . (12)

4 Effects of International Income Transfers

As shown in (10)-(12), there are four possible cases of laissez-faire equilibrium with respect to maintenance activities of each country. In this paper, we are concerned with the effects of international income transfers between a contributor (an industrial country) and a noncontributor (a developing country) on the global environment. Thus, we focus on the equilibrium with rh I > 0 and rh D = 0.

We consider an international income transfer e, with 0 < e < w i (i = I, D). A transfer from country i to country j ( j 5~ i) means that country i transfers part of its endowments e to country j in a lump-sum fashion. We analyze how the transfer affects the global environmental quality and welfare. In particular, we examine the conditions under which the global environmental quality and welfare of both countries improve or worsen, and discuss the implications of the results for environmental policies.

Let rh I and rh D be the equilibrium amounts of maintenance investment after international transfers and let/~ be the corresponding quality of the global environment. Let /5 ri and Oi be the utility of country i before and after transfers, respectively.

4.1 Transfer from Country I to Country D

When we consider a transfer from country I to country D in an equilibrium with r~ I > 0 and r~ D = 0, the equilibrium after the transfer is characterized by one of the following four cases: (a) r~ I > 0 and r~ D -~- 0, ( b ) /~/I > 0 and ND > 0, (c) /~I = 0 and ND > 0, (d) r~ ~ = 0 and

262 T. Ono

r~ D = 0. The transfer from country I to country D reflects a situation in which an industrial country which can afford to invest in the environment transfers part of its income to a developing country which cannot afford to invest in the environment. In order to obtain implications for environmental policies in the above situation, we confine our analysis to the following two cases: (a) #t r > 0 and nh D -~ 0, and (b) th ~ > 0 and r~ D > 0. The former is a situation in which the transfer does not induce the recipient to invest in the environment, while the latter is a situation in which the transfer induces the recipient to invest in the environment.

a. ~t I > 0 and rh D = 0. We obtain the following results.

Proposition 1: (1)/~ < /~; (2) 0 r > ~rI; (3) ~D < [~D if yD > yr.

Proof." 1. From (11), the equilibrium environmental quality before transfer,/~, is characterized by

q_ (fir ..~ y I ) ~ I ( ~ ) = Eo _ fiDwD _~ yItoI . (13)

After the transfer, the equilibrium global environmental quality,/~, is characterized by

j~ q_ (/~r .q_ yI)~bI(/~) = E0 - flDwD -t- y r w I -- (]~D q_ yI )8 . (14)

Since ~b r is increasing in E, we obtain/~ < /~ by comparing Eqs. (13) and (14).

2. Since country I invests in the environment before and after the transfer, we have gI = 4r and gI = qr respectively. From the result in part 1 and the monotonicity of ~b I, we obtain gI > g~. Thus, we have 01 > 0 r.

3. In an equilibrium with rh I > 0, the constraint of country D before transfer is E = E0 + Y~d=I,D Y i w i -- (flI _}_ yI)~I _ (riD q_ yD)gD,

while, in an equilibrium with /,~I > 0, the constraint after the transfer is E = E0 + ~ i = r , D Y i w i - - (flI q_ yI){I q_ (yD _ y r ) e _ (]~D q_ yD)~D.

Since gI > gr, the constraint line in cD--E space shifts upward if vD > yI. Moreover, the equilibrium point after the transfer is on the right side of the equilibrium point before transfer, since ?D = w D § e > gD = w D. Thus, the indifference curve of country D also shifts upward in equilibrium, which implies that country D is made better off by the transfer if yD > yI . []


When the transfer from country I with #t I > 0 to c o u n t r y D with #t D -= 0 does not induce country D to invest in the environment, the equilibrium global environmental quality deteriorates since there are two negative effects on the environment: one is the decrease of country I's maintenance investment and the other is the increase of country D's consumption. Country I is made worse off by the transfer because of the decrease in the environmental quality and consumption. However, country D is made better off if ?/D > gt: the positive effect of the increase in consumption exceeds the negative effect of the decrease in the environmental quality.

b. ~t I > 0 and rh D > 0. From (12), the equilibrium environmental quality after the transfer, /~, satisfies

t? + = E0 + ,iw + (• _ y )e. i i

(15)

Since we cannot directly compare (15) with (13), it is difficult to show whether the equilibrium environmental quality and welfare are increased or not by the transfer. However, by using an example, we can analyze the effect of the transfer on the equilibrium environmental quality and on welfare.

Example 1: Assume country i is characterized by the utility function U i = In c i + In E. 4 Then, we have E > /~ if

- E o + 3flDw D - yltoI -I- 2yDw D + 2(y D - yI)8 > 0 . (16)

We can also show /QI > /~I if (16) holds. Moreover, if the environmental quality is improved by the transfer, country D is also made better off by the transfer since the consumption of country D increases due to the income effect. Therefore, the transfer improves the welfare of both countries if (16) holds.

Condition (16) implies a large yD and a s m a l l ~/I. A large yD means a powerful effect of maintenance investment of country D on the environment. A small yI implies that the decrease in maintenance investment of country I does not crucially affect the environmental quality.

4 This utility function implies that each country has identical tastes over consumption and the global environmental quality.

264 T. Ono

Implication for Environmental Policies

The analysis we have considered above corresponds to a situation in which industrial countries, like European countries, Japan, or the USA, make income transfers to developing countries which are in the process of economic development. The result implies that it is necessary, in view of global environmental preservation, to implement international transfers such that recipients are induced to start maintenance activities to protect the environment. Moreover, such transfers can improve the welfare of each country. Thus, policymakers in industrial countries should take into account the impact of transfers, such as ODA, on the maintenance activities for the environment in developing countries.

4.2 Transfer from Country D to Country I

In this section, we consider a transfer from country D to country I in an equilibrium with /~I > 0 and rh D = 0. We focus on a case where maintenance activities in each country remain unchanged before and after the transfer: rh I > 0, rh D --- 0. We obtain the following result:

Proposition 2: (1) E > /~; (2) U~ > OI; (3) OD > OD if ?/D > ~/I.

Proof." 1. From (11), the equilibrium environmental quality before transfer, /~, is characterized by /~ + (ill + VI)dpI(~) = Eo - flI)wD + glw~, while the equilibrium global environmental quality after the transfer, /~, is characterized by /~ + (fl~ + gI)~bI(/~) = Eo - fiDwD + l/IwI + (rid + gl)e" Since ~b I is strictly increasing in E, we have/~ > /~ by comparing the two equations.

2. Since country I invests in the environment before and after the transfer, we have g~ = ~bI(/~) and gI = ~bI(/~), respectively. From the result in part 1 and the monotonicity of ~b I, we obtain ~I .< ~I. Thus, we have ~I < ~I.

3. In an equilibrium with rh I > 0, the constraint of country D before transfer is E = Eo + E i= I ,D ~ i l l ) i - (/3I "~- ~I)~I _ (~3D -t- ~/D)~D, while, in an equilibrium with rh I > 0, the constraint after the transfer is E ----- E0 + ~ i = I , D Y i tO i - - (fir _[_ VI)~I @ (VI _ vD)6 _ (flD _t_ vD)~D.

Since gI < ~I, the constraint line in c D - E space shifts downward i f yD _> gI. The equilibrium point after the transfer is on the left side of the one before the transfer since gD = w D _ e < gD = W D. Thus, the


indifference curve also shifts downward in equilibrium, which implies that country D is made worse off by the transfer if ~/D > yI. []

The transfer from a noncontributing country (country D) to a contributing country (country I) increases the equilibrium environmental quality even if the negative effect of country I's consumption on the environment (fiI) is large. This is because country I makes use of the additional income for the environmental maintenance and country D decreases its consumption. Country I is made better off since the environmental quality increases. The effect of the transfer on the utility of country D is ambiguous, since there is the negative effect of the decrease of its consumption and the positive effect of the improvement of the environmental quality. If V D >_ gI, country D is made worse off since the positive effect of the improvement in the environmental quality is less than the negative effect of the decrease in country D's consumption. However, there are possibilities that country D is also made better off by the transfer. We show this by evaluating the change in utility due to the marginal changes in endowments of countries I and D.

Proposition 3: Consider a situation with /~/I > 0 and rh D = 0. Sup- pose that the endowment of country I (country D) marginally increases (decreases) by a lump-sum international transfer between these two countries. Then, country D is marginally made better off if _(flD + yD) § f V ( E 0 __ fiDwD § FIwI)(flD § yI) > O.

Proof." See appendix. []

The first term of the sufficient condition is the negative effect of the decrease in consumption and the second term is the positive effect of the improvement of the environmental quality caused by the increase in country I's maintenance investment. If country I has an efficient maintenance technology (a large yI), then country D can be made better off by the transfer.

Implication for Environmental Policies

The above analysis corresponds to the policy of distributing quotas of emissions which restrict, in this model, consumption that is harmful for the environment. Consider a situation where a worldwide organization, like the United Nations, distributes quotas of emissions so that contributing countries that invest in the environment have more and

266 T. Ono

noncontributing countries less. A trading market of emission permits would also be created. Then, income redistribution from the noncontributing to the contributing countries will occur since the former must purchase permits in order to satisfy their consumption need. Then, as shown in Proposition 2, the global environmental quality can be improved. Moreover, both countries would be better off (Proposition 3).

5 Concluding Remarks

In this paper, we extend the standard model of private provision of public goods by including consumption externalities so as to characterize a situation where economic activities pollute the environment. Based on that model, we consider a case in which there is an industrial country which can afford to invest in the environment and a developing country which cannot. Then, we show that international income transfers, whichever the direction, can improve the global environmental quality as well as the welfare of each country. We also show that the results have important implications for policies such as ODA or the assignment of emission permits.

Several extensions of our analysis can be considered. First, by including a production process which yields pollution, the analysis would become more realistic. In the case of international transfers from an industrial country to a developing country, we should analyze how the transfer affects the capital stock of the recipient country as well as the global environment. Moreover, by developing a dynamic model with capital accumulation, we could find how international transfers affect economic growth and the environment in the long run. Niho (1996b) and Ono and Maeda (1997) analyze this issue, but their models do not include productive capital. Thus, the effects of transfers in a dynamic model with productive capital remain to be analyzed.

Secondly, the. assignment of tradable emission permits can be analyzed in our model. Since our model includes consumption externalities, tradable emission permits are introduced by assigning consumption quotas. If a country is assigned a small number of quotas, it can purchase more in a market of tradable emission permits in order to satisfy its need for consumption. Therefore, by calculating the optimal consumption level in each country (Chichilnisky and Heal, 1994), we will achieve a Pareto-efficient allocation by introducing tradable emission permits.


Appendix

Suppose that the endowment in country D decreases by dw D > 0, while the endowment in country I increases by dw I > 0. Note that dw D = dw I.

In an original equilibrium, country D does not invest in the environment: rh D = 0. The marginal decrease in country D's endowment is equivalent to the marginal decrease in its consumption. In other words, marginal increase in country I's endowment is equivalent to the marginal decrease in country D's consumption. We have

dcD/dw D = - 1 . (A.1)

From the optimal response function of country I, the amount of maintenance investment after the transfer, rh I, is

1 n~I - - /~I _]_

flI

1 flI -t-

yifI(Eo - f lD(toD -- dto D) -~- y I ( w I -}- dwI))

1 + yi {E0 - f lD(wD -- dto D) - f l l ( toI -1- dwI)}

I f lDwD y I w I y f f (Eo - + ~_ (flD ~_ VI) dwI))

l flD~u D f l i w i + FI {E0 - _ .~_ ( t O _ /~I) dwI)}

since d w D = dw I. Thus,

Om I fI ' (E 0 __ fiDtoD .q_ yI t0I)( /~D _~_ y I ) __ (flD __ fiI) m

OWI ~I _~_ yI (A.2)

From the budget equation of country I, we have

dmI /dw I = 1 - dcI /dw I . (A.3)

Then, the marginal change in the environmental quality is:

OE ~ OcI _ flD OcD V~ Om~ D+

= _ f ix (1_ OmI] flD yI OmI OwI / + + Ow----~;

from (A.1) and (A.3)

268 T. Ono

Om I = (_ f l I ~_ flD) -I- (flI _~_ y I ) 0tO I

= f I ' ( E ~ _ flDtoD ~_ ~Iwl) ( f lD _jr ~I); f rom (A.2) .

Finally, the marginal change in country D's utility is:

o(JD -D OcD -D OE Ow I = u 10w-- ~ 2r u 20w-----'ii

= _ ( r i d + vD)fiD ~w-TwI + OcD (t DOE'zOwI f rom (2)

_ _ riD ( D flDwD -- 2 {-- fl -~ yD) -t- f V ( E 0 -- ~ yIt0I)(f lD _}_ yI)} .

Since ~D > 0, we have o(]D/Ow I > 0 if - - ( f i D + v D ) + f I ' (Eo-- f iDwD

+ V~wr)(flD + yI) > O.

Acknowledgements

The author would like to thank Yasuo Maeda, Kazuhisa Yamashita, and two anonymous referees for their useful comments.

References

Bergstrom, T. C., Blume, L., and Varian, H. R. (1986): "On the Private Provi- sion of Public Goods." Journal of Public Economics 29: 25-49.

Buchholz, W., and Konrad, K. (1994): "Global Environmental Problems and the Strategic Choice of Technology." Journal of Economics / Zeitschrift fiir Nationalgkonomie 60: 299-321.

- - (1995): "Strategic Transfers and Private Provision of Public Goods." Journal of Public Economics 57: 489-505.

Chichilnisky, G., and Heal, G. (1994): "Who Should Abate Carbon Emis- sions?: an International Viewpoint." Economics Letters 44: 443-449.

Ihori, T. (1996): "International Public Goods and Contribution Productivity Differentials." Journal of Public Economics 61: 139-154.

Murdoch, J.C., and Sandier, T. (1997): "The Voluntary Provision of a Pure Public Good: the Case of Reduced CFC Emissions and the Montreal Pro- tocol." Journal of Public Economics 63: 331-349.

Niho, Y. (1996a): "Effects of an International Income Transfer on the Global Environmental Quality." Japan and the Worm Economy 8: 401-410.

- - (1996b): "International Income Transfers and the Environmental Qual- ity." Keio Economic Studies 33: 23-33.


Ono, T., and Maeda, Y. (1997): "Long-run Neutrality of the Effects of Inter- national Transfers on the Environment." Mimeo, Osaka Prefecture Uni- versity, Osaka.

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Address of author: Tetsuo Ono, College of Economics, Osaka Prefecture University, 1-1 Gakuen-cho, Sakai, Osaka 599-8531, Japan.

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Consumption externalities and the effects of international income transfers on the global environment