T. Ihori, ECONOMIC-INTEGRATION OF COUNTRIES WITH INTERNATIONAL PUBLIC-GOODS, Journal of the Japanese and international economies, 8(4), 1994, pp. 530-550
This paper develops a model of economic integration that is subject to
random emergency costs. To mitigate the effects of these disruptions,
each country that belongs to a club provides an international public
good. This paper incorporates voluntary provision of public goods into
a rigorous general equilibrium model of economic integration under un
certainty. It is shown that an increase in the probability of war or t
he penalty ratio in a club may raise the welfare and the size of the c
lub if risk aversion with respect to private consumption is not so lar
ge. (C) 1994 Academic Press, Inc.