Research Economic Seminar: Transboundary Haze Games: Local Capture and Common Agency

We study how transboundary, intergovernmental fire and haze negotiations interact with local, subnational government collusion and capture in a decentralized country. The local government collusion and capture problem is modelled as a competing principals and common agency problem that interacts with the central government’s game of chicken. The results show that the central government can persuade farmers and prevent burning when the incremental benefits from slashing and burning are lower, the total direct and indirect costs and damages of fire and haze are higher and the required enforcement and abatement costs are not too high. Neighbouring governments can help mitigate the central government’s budget constraint and help deter violating multinational companies. We develop a multitask multiprincipal framework to expand our solutions set to include partial burning outcomes and negative compensations. The results inform on a set of policy solutions to these complex transboundary fire and haze negotiation and local capture problems