April 3 , 2000 Transboundary Environmental Problems with a Mobile Population : Is There a Need for Central Policy ?

It is a widely held view that efficient environmental policies regulating transboundary pollution will be adopted only if there is interjurisdictional coordination. Efficient policies can be adopted as a result of interstate treaties or mandated by a central authority. However, if the policies of states are chosen to maximize the same function of own-citizen welfare, and if individuals migrate freely between states, constrained-efficient environmental regulatory policies are a non-cooperative equilibrium. The policies are constrained-efficient in equilibrium, the policy choices are the same as those found by maximizing the social welfare function subject to a policy feasibility constraint. 2 1 Introduction Transboundary environmental problems are characterized by the environment in a region being affected directly by actions taken in one or more other regions 1. Transboundary environmental problems have received a large attention in the literature; early contributions include OECD (1976) and d'Arge (1975). The most obvious type of transboundary environmental problem is emissions of some physical substance from one region having a negative impact on the environment in other regions. However, transboundary environmental problems may also be of a non-physical kind, such as e.g. a concern about worldwide biodiversity, see Barrett (1992). In this paper we shall interpret our variables as physical emissions causing environmental damage, but our results are equally valid for non-physical environmental problems.