Funding Global Public Goods: The Dark Side of Multilateralism

Authors


  • This paper was written during a research stay funded by an ERP fellowship of the Studienstiftung des deutschen Volkes. Patrick Bayer gratefully acknowledges this generous funding and is thankful for the hospitality of Columbia University. We thank Scott Barrett, Joe Brown, and Chris Marcoux for useful comments on a previous draft. We also thank the editor of the Review of Policy Research and the anonymous reviewers for their helpful comments.

Abstract

The funding of global public goods, such as climate mitigation, presents a complex strategic problem. Potential recipients demand side payments for implementing projects that furnish global public goods, and donors can cooperate to provide the funding. We offer a game-theoretic analysis of this problem. In our model, a recipient demands project funding. Donors can form a multilateral program to jointly fund the project. If no program is formed, bilateral funding remains a possibility. We find that donors rely on multilateralism if their preferences are relatively symmetric and domestic political constraints on funding are lax. In this case, the recipient secures large rents from project implementation. Thus, even donors with strong interests in global public good provision have incentives to oppose institutional arrangements that promote multilateral funding. These incentives have played an important role in multilateral negotiations on climate finance, especially in Cancun (2010) and Durban (2011).

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