When decentralized decision-making is associated with externalities, the equilibrium will be inefficient, which, in principle, calls for coordination to internalize the external effects. The present thesis analyzes two institutions, small countries and trade unions, that might wish to coordinate their policy for that reason. However, the competing institution typically have more than one policy instrument available to maximize their well-being thereby imposing external effects on others. Hence, coordination that covers only one of the instruments leaves door open for the competition to continue. The welfare effects of such partial coordination are analyzed in the context of small countries competing for mobile capital and in a framework of decentralized union behavior. The thesis shows that partial coordination agreements are less effective than the more unrealistic scenario of full coordination of all policy instruments. Special cases are identified in which they are not effective at all or are even counterproductive.