Interstate Competition and Environmental Regulation: A Test of the Race‐to‐the‐Bottom Thesis^*

TLDR

The study examines how interstate competition influences the stringency of state environmental regulation enforcement. The authors employ pooled cross‑sectional time‑series analysis of state surface‑mining regulations to evaluate whether enforcement gaps relative to competitors affect enforcement stringency. Results indicate that states adjust enforcement when they are stricter than competitors, but not when competitors are stricter, providing empirical evidence of a race‑to‑the‑bottom in environmental regulation.

Abstract

Objective. This study assesses the effect of interstate competition on the stringency with which states enforce environmental regulations. Method. Pooled cross‐sectional time‐series analysis of state surface‐mining regulation is used to determine if the enforcement gap between a state and competitor states affects the stringency of state enforcement. Results. The results suggest that state enforcement is systematically affected by the behavior of regional competitors. States adjust their enforcement in response to competitor states when their enforcement stringency exceeds that of their competitors. When competitors' enforcement is more stringent, however, their behavior does not have a significant effect. Conclusion. This study provides empirical evidence for a race to the bottom in state environmental regulation.