Equity‐efficiency tradeoffs in international bargaining

Adib Bagh and Josh Ederington

Economic Inquiry, 2024, vol. 62, issue 2, 782-804

Abstract: This paper analyzes the welfare impact of expanding the negotiation agenda of an international agreement between asymmetric countries (e.g., including specific negotiations over environmental regulations or labor standards in a conventional trade agreement) and demonstrates why such proposed expansions are contentious. A main result is that agenda expansions that provide more bargaining flexibility will increase the efficiency of the agreement but can result in a less equitable agreement that hurts the country that is at a bargaining disadvantage. Similarly, we demonstrate that decreases in bargaining game asymmetry can also make the disadvantaged country worse‐off even as it increases global welfare.

Date: 2024
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https://doi.org/10.1111/ecin.13201

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