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A Natural Experiment on the 'Race to the Bottom' Hypothesis: Testing for Stochastic Dominance in Temporal Pollution Trends

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  • John List
  • Daniel Millimet

Abstract

Devolution of tasks to local levels of government has recently become a popular agenda item within certain political factions in the US. While one expects the local policymaker to tailor policies to match the preferences of his constituents, critics of local policymaking claim that externalities are ignored and inefficiencies thus arise under local control of certain policies. A primary example concerns the control of pollution, which is known to have adverse effects on neighbouring jurisdictions. Whether localities actually 'race to the bottom' and enact lax environmental policies when given the chance remains an open issue. In this study, we make use of stochastic dominance tests to examine if President Reagan's policy of 'New Federalism' in the early 1980s induced states to lower environmental standards. Among the several environmental measures analysed, we do not find any evidence that the 'race to the bottom' materialized. Indeed, the evidence shows that even during these lean years of federal intervention several indicators of environmental quality at the state level continued to improve.

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  • John List & Daniel Millimet, 2003. "A Natural Experiment on the 'Race to the Bottom' Hypothesis: Testing for Stochastic Dominance in Temporal Pollution Trends," Natural Field Experiments 00505, The Field Experiments Website.
  • Handle: RePEc:feb:natura:00505
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    Cited by:

    1. Zhijun Gu & Chaowei Tian & Zeyuan Zheng & Shujian Zhang, 2022. "Favorable Fiscal Self-Sufficiency Enables Local Governments to Better Improve the Environmental Governance—Evidence from China’s Lower-Pollution Areas," Sustainability, MDPI, vol. 14(23), pages 1-14, December.
    2. Levinson, Arik, 2003. "Environmental Regulatory Competition: A Status Report and Some New Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 91-106, March.
    3. Herath, Deepananda P.B. & Weersink, Alfons & Thrikawala, Sunil, 2006. "Environmental Regulations and Livestock Production Levels: What is the Direction of Causality?," 2006 Annual meeting, July 23-26, Long Beach, CA 21482, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Lingling Zhang & Yufeng Wang & Rahman Dunya, 2023. "How Does Environmental Regulation Affect the Development of China’s Pig Industry," Sustainability, MDPI, vol. 15(10), pages 1-22, May.
    5. Galinato, Gregmar I. & Chouinard, Hayley H., 2018. "Strategic interaction and institutional quality determinants of environmental regulations," Resource and Energy Economics, Elsevier, vol. 53(C), pages 114-132.
    6. Banzhaf, H. Spencer & Chupp, B. Andrew, 2012. "Fiscal federalism and interjurisdictional externalities: New results and an application to US Air pollution," Journal of Public Economics, Elsevier, vol. 96(5), pages 449-464.
    7. John List, 2021. "2021 Summary Data of Artefactual Field Experiments Published on Fieldexperiments.com," Artefactual Field Experiments 00749, The Field Experiments Website.
    8. John List, 2022. "2021 Summary Data of Natural Field Experiments Published on Fieldexperiments.com," Natural Field Experiments 00747, The Field Experiments Website.
    9. Stephan J Goetz & Mark D Partridge & Dan S Rickman & Shibalee Majumdar, 2011. "Sharing the Gains of Local Economic Growth: Race-to-the-Top versus Race-to-the-Bottom Economic Development," Environment and Planning C, , vol. 29(3), pages 428-456, June.
    10. Millimet, Daniel L., 2013. "Environmental Federalism: A Survey of the Empirical Literature," IZA Discussion Papers 7831, Institute of Labor Economics (IZA).
    11. Han, Chao & Tian, Xian-Liang, 2022. "Less pollution under a more centralized environmental system: Evidence from vertical environmental reforms in China," Energy Economics, Elsevier, vol. 112(C).
    12. Shimshack, Jay P. & Ward, Michael B. & Beatty, Timothy K.M., 2007. "Mercury advisories: Information, education, and fish consumption," Journal of Environmental Economics and Management, Elsevier, vol. 53(2), pages 158-179, March.
    13. María A. García-Valiñas, 2004. "Environmental federalism: a proposal of decentralization," ERSA conference papers ersa04p492, European Regional Science Association.
    14. Sjöberg, Eric & Xu, Jing, 2018. "An Empirical Study of US Environmental Federalism: RCRA Enforcement From 1998 to 2011," Ecological Economics, Elsevier, vol. 147(C), pages 253-263.
    15. Erwin Bulte & John A. List & Mark C. Strazicich, 2007. "Regulatory Federalism And The Distribution Of Air Pollutant Emissions," Journal of Regional Science, Wiley Blackwell, vol. 47(1), pages 155-178, February.
    16. Kunce, Mitch & Shogren, Jason F., 2007. "Destructive interjurisdictional competition: Firm, capital and labor mobility in a model of direct emission control," Ecological Economics, Elsevier, vol. 60(3), pages 543-549, January.
    17. Haiqing Hu & Di Chen & Chun‐Ping Chang & Yin Chu, 2021. "The Political Economy Of Environmental Consequences: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 250-306, February.
    18. B. Andrew Chupp, 2011. "Spillovers and Taxes: What Drives Strategic Competition in Environmental Policies?," Working Paper Series 20110402, Illinois State University, Department of Economics.
    19. Jay Shimshack, 2004. "Are Mercury Advisories Effective? Inofrmation, Education, and Fish Consumption," Discussion Papers Series, Department of Economics, Tufts University 0423, Department of Economics, Tufts University.
    20. Jingxia Chai & Yu Hao & Haitao Wu & Yuemiao Yang, 2021. "Do constraints created by economic growth targets benefit sustainable development? Evidence from China," Business Strategy and the Environment, Wiley Blackwell, vol. 30(8), pages 4188-4205, December.
    21. John List, 2022. "Framed Field Experiments: 2021 Summary on Fieldexperiments.com," Framed Field Experiments 00752, The Field Experiments Website.
    22. Gregmar Galinato & Hayley Chouinard, "undated". "Strategic Interaction and Institutional Quality Determinants of Environmental Regulations across Select OECD Countries," Working Papers 2014-7, School of Economic Sciences, Washington State University.

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