Environmental governance in federal systems: the effects of capital competition and lobby groups

We argue that centralized and decentralized environmental governance yield equivalent environmental regulations. We model worker, environmental, and capital owner lobby groups that seek influence by offering political contributions. Worker lobbying in the decentralized case has an effect on environmental regulations identical to that of capital owner lobbying in the centralized case. This is because the aggregate effects of environmental regulations on income are equivalent under two institutional designs. Whereas workers carry the full burden in the decentralized case when capital competition occurs, the burden is shared with the capital owners in the centralized case. We present evidence consistent with our theory.