Cooperative federalism" as a strategic interaction

"Under most U.S. environmental laws and some health and safety laws, states may apply to implement and enforce the law, through a process known as authorization or primacy. The paper presents a simple model of the strategic interaction between the federal and state governments with such voluntary decentralization. The model suggests that the federal government may design the policy so that states that desire stringent regulation authorize, whereas other states remain under the federal program. We then test the implications of this model using data on U.S. water pollution and hazardous waste regulations, two of the most important environmental programs to allow authorization. Consistent with the results of our model, we find that states with stronger environmental preferences authorize more quickly and more fully under both policies. This evidence runs counter to concerns that states use control of their programs to undercut federal environmental standards"--National Bureau of Economic Research web site.