The political economy of regulation in a federal system: How interest group dynamics interact with a federal system to influence regulatory outcomes

I analyze, both theoretically and empirically, the political economy of assigning authority to provide a public good to alternative sets of jurisdictions within a multi-tiered government. I show that the average quantity of the public good, and the variation in the quantity across jurisdictions, are affected by the method used to choose which level of government has the authority to provide the good in each geographic area. A positive theoretical model analyzes how government decisions to seek or grant authority to provide a public good. An empirical illustration considers the example of the California hazardous waste program. In this program, counties are the default regulators, but cities can qualify for authority if they first seek authority and then obtain the consent of their county.; The new theoretical model predicts that cities will volunteer and counties will approve when: (1) the city and county have very different preferences over the good; and (2) an interest group is relatively stronger in the city than in the overall county. In addition, cities will tend to volunteer when they are small relative to the county and have large fiscal resources. The results generally support the hypotheses. Finally, to test whether authority choice rules affect policy outcomes, I simulate anticipated inspection levels if all cities that volunteer are allowed to administer their own hazardous waste program. I find that while the statewide mean inspection level would increase, non-compliance with state minim inspection rate standards would increase substantially compared to the existing rules.; The key question of the third chapter is whether government re prioritization of distinct policy areas is better explained by a model where regulators maximize social welfare or one where special interest influence is also taken into account. I use the common agency approach of Grossman and Helpmann (1994) to build a model of environmental agency regulatory enforcement priorities that nests welfare maximization, special interest support, and budgetary factors. I test the hypotheses from the theoretical model with data from an empirical example using data from local government prioritization of two distinct hazardous-waste-regulation programs. The results generally support the hypotheses.