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A Reconsideration of Environmental Federalism


  • Oates, Wallace

    () (Resources for the Future)


This paper provides a review and assessment of the debate over environmental federalism-the issue of the roles of different levels of government in environmental management. The paper begins with the presentation of three benchmark cases that provide a framework for thinking about the issue. It then offers a review, first of the theoretical literature and second of some new, provocative empirical literature on the race to the bottom. The paper contends that there remains, under certain circumstances, an important role for decentralized government in the setting of environmental standards and the design of regulatory programs. The central government, in addition to setting standards for "national" pollutants, has a fundamental contribution to make in supporting research in environmental science and pollution control technology and in providing needed information and guidance to state and local governments.

Suggested Citation

  • Oates, Wallace, 2001. "A Reconsideration of Environmental Federalism," Discussion Papers dp-01-54, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-01-54

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    References listed on IDEAS

    1. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
    2. Daniel L. Millimet, 2003. "Assessing the Empirical Impact of Environmental Federalism," Journal of Regional Science, Wiley Blackwell, vol. 43(4), pages 711-733.
    3. Esty, Daniel C. & Geradin, Damien (ed.), 2001. "Regulatory Competition and Economic Integration: Comparative Perspectives," OUP Catalogue, Oxford University Press, number 9780198299059, June.
    4. Wellisch,Dietmar, 2000. "Theory of Public Finance in a Federal State," Cambridge Books, Cambridge University Press, number 9780521630351, March.
    5. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
    6. List, John A. & Co, Catherine Y., 2000. "The Effects of Environmental Regulations on Foreign Direct Investment," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 1-20, July.
    7. John A. List & Mitch Kunce, 2000. "Environmental Protection and Economic Growth: What Do the Residuals Tell Us?," Land Economics, University of Wisconsin Press, vol. 76(2), pages 267-282.
    8. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, November.
    9. Farrell, Alex & Carter, Robert & Raufer, Roger, 1999. "The NOx Budget: market-based control of tropospheric ozone in the northeastern United States," Resource and Energy Economics, Elsevier, vol. 21(2), pages 103-124, May.
    10. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, March.
    11. Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
    12. Henderson, J Vernon, 1996. "Effects of Air Quality Regulation," American Economic Review, American Economic Association, vol. 86(4), pages 789-813, September.
    13. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
    14. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Strategic Interaction and the Determination of Environmental Policy across U.S. States," Journal of Urban Economics, Elsevier, vol. 51(1), pages 101-122, January.
    15. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
    16. John A. List & W. Warren McHone & Daniel L. Millimet, 2003. "Effects of air quality regulation on the destination choice of relocating plants," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 657-678, October.
    17. List, John A. & Mason, Charles F., 2001. "Optimal Institutional Arrangements for Transboundary Pollutants in a Second-Best World: Evidence from a Differential Game with Asymmetric Players," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 277-296, November.
    18. List, John A & Bulte, Erwin H & Shogren, Jason F, 2002. ""Beggar Thy Neighbor": Testing for Free Riding in State-Level Endangered Species Expenditures," Public Choice, Springer, vol. 111(3-4), pages 303-315, June.
    19. Timothy J. Bartik, 2002. "The Effects of Environmental Regulation on Business Location in the United States," Book chapters authored by Upjohn Institute researchers,in: Wayne B. Gray (ed.), Economic Costs and Consequences of Environmental Regulation, pages 129-151 W.E. Upjohn Institute for Employment Research.
    20. Tim Jeppesen & John A. List & Henk Folmer, 2002. "Environmental Regulations and New Plant Location Decisions: Evidence from a Meta-Analysis," Journal of Regional Science, Wiley Blackwell, vol. 42(1), pages 19-49.
    21. Farrell, Alex, 2000. "The NOx Budget: A Look at the First Year," The Electricity Journal, Elsevier, vol. 13(2), pages 83-93, March.
    22. Parry, Ian W. H., 2003. "How large are the welfare costs of tax competition?," Journal of Urban Economics, Elsevier, vol. 54(1), pages 39-60, July.
    23. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
    24. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
    25. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
    26. John A. List & Shelby Gerking, 2000. "Regulatory Federalism and Environmental Protection in the United States," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 453-471.
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    Cited by:

    1. Megan H. Accordino and Deepak Rajagopal, 2015. "When a National Cap-and-Trade Policy with Carve-out Provision May Be Preferable to a National CO2 Tax," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Sigman, Hilary, 2003. "Letting States Do the Dirty Work: State Responsibility for Federal Environmental Regulation," National Tax Journal, National Tax Association, vol. 56(1), pages 107-122, March.
    3. Böhringer, Christoph & Rivers, Nicholas & Yonezawa, Hidemichi, 2016. "Vertical fiscal externalities and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 77(C), pages 51-74.
    4. repec:tpr:glenvp:v:17:y:2017:i:2:p:45-64 is not listed on IDEAS
    5. T. Persson, 2009. "Linking the Northeast states of the US mitigation program to the EU Emission Trading Scheme—Implications and costs," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 399-408, June.
    6. Williams, Roberton C., 2012. "Growing state–federal conflicts in environmental policy: The role of market-based regulation," Journal of Public Economics, Elsevier, vol. 96(11), pages 1092-1099.
    7. Francesco Prota & Francesco Contò, 2004. "Location decision of polluting firms and environmental policy," ERSA conference papers ersa04p413, European Regional Science Association.
    8. Kumar, Surender & Managi, Shunsuke, 2009. "Compensation for environmental services and intergovernmental fiscal transfers: The case of India," Ecological Economics, Elsevier, vol. 68(12), pages 3052-3059, October.
    9. Gregory Besharov & Ari Zweiman, 2005. "Inefficient Local Regulation of Local Externalities," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(3), pages 383-403, August.
    10. Fredriksson, Per G. & Mani, Muthukumara & Wollscheid, Jim R., 2006. "Environmental federalism : a panacea or Pandora's box for developing countries?," Policy Research Working Paper Series 3847, The World Bank.
    11. Chakraborty, Lekha S, 2006. "Determining Environmental Quality in a Federal Setting: An Empirical Analysis of Subnational Governments in India," MPRA Paper 7605, University Library of Munich, Germany.
    12. Hua Wang & Wenhua Di, 2002. "The determinants of Government environmental performance - an empirical analysis of Chinese townships," Policy Research Working Paper Series 2937, The World Bank.
    13. Eric Helland & Andrew B. Whitford, "undated". "Pollution Incidence and Political Jurisdiction: Evidence from the TRI," Claremont Colleges Working Papers 2002-28, Claremont Colleges.
    14. repec:wsi:wepxxx:v:03:y:2017:i:02:n:s2382624x16500338 is not listed on IDEAS

    More about this item


    environmental federalism; environmental management; environmental policy; environmental regulation;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • H1 - Public Economics - - Structure and Scope of Government
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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