Regulatory Races: The Effects of Jurisdictional Competition on Regulatory Standards
Journal of Economic Literature
vol. 54,
no. 1, March 2016
(pp. 52-97)
Abstract
This article surveys the literature on regulatory arbitrage in four settings: labor regulation, environmental protection, corporate governance, and banking and finance. For a regulatory race to occur, firms must migrate across state or country borders in response to geographic differences in the costs and benefits of regulation, and governments must shape their regulatory policies with the aim of affecting those migration flows. We find that both these conditions hold only in rare circumstances. Instead, the much more common outcome is for political pressures within jurisdictions to produce a heterogeneous pattern resembling Tiebout sorting. Such regulatory convergence as occurs is more often the result of deliberate harmonization or imitation. ( JEL G18, G28, G38, H73, J08, L51, Q58)Citation
Carruthers, Bruce G., and Naomi R. Lamoreaux. 2016. "Regulatory Races: The Effects of Jurisdictional Competition on Regulatory Standards." Journal of Economic Literature, 54 (1): 52-97. DOI: 10.1257/jel.54.1.52Additional Materials
JEL Classification
- G18 General Financial Markets: Government Policy and Regulation
- G28 Financial Institutions and Services: Government Policy and Regulation
- G38 Corporate Finance and Governance: Government Policy and Regulation
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- J08 Labor Economics Policies
- L51 Economics of Regulation
- Q58 Environmental Economics: Government Policy