
Contents
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1. Introduction 1. Introduction
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2. Race to the Top? Race to the Bottom? How to Decide? 2. Race to the Top? Race to the Bottom? How to Decide?
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Race to the Top Race to the Top
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Race to the Bottom Race to the Bottom
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Losing T1, Economies of Scale Losing T1, Economies of Scale
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Losing T5, Nonexclusion and Inefficient Taxation Losing T5, Nonexclusion and Inefficient Taxation
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Losing T6, Intercommunity Spillovers Losing T6, Intercommunity Spillovers
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How to Decide? How to Decide?
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3. Assigning Regulatory Policy: A FIST Analysis 3. Assigning Regulatory Policy: A FIST Analysis
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A FIST Evaluation: State Regulation of Corporate Governance A FIST Evaluation: State Regulation of Corporate Governance
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A FIST Evaluation: State Regulation of Business Strategies A FIST Evaluation: State Regulation of Business Strategies
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A FIST Evaluation: State Regulation of Environmental Quality A FIST Evaluation: State Regulation of Environmental Quality
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4. Summing Up 4. Summing Up
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8 Regulation in the Federal Union
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Published:June 2020
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Abstract
This chapter outlines the principles for the efficient regulation of market activities in a federal economy. As with the provision of public services and the assignment of taxing powers, the aim is to allocate regulatory responsibilities between local, state, and national governments so as to ensure efficient allocations. There may be too little regulation as a result of competition by local and state governments for private business and the compensating benefits for residents that those firms might provide, a competition known as “the race to the bottom.” The result will be lax environmental, competitive, or financial regulations imposing damages on residents of other localities or states. If those damages are significant and widespread, then national regulation of such activities will be appropriate. On the other hand, national regulations that preempt local regulations may restrict the ability of state and local governments to tailor their own environment or competitive marketplace to meet the specific needs of their residents. Allowing local regulatory choice that benefits only local residents and imposes only local costs, and may be copied by other states, may lead to a “race to the top.” The chapter provides a template for separating the two “races” and facilitating an informed national debate on federal regulatory policies.
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