Contrary to conventional wisdom about an environmental race to the bottom, the theoretical literature as exemplified by Oates and Schwab [1988, Journal of Public Economics, 35:333–354] maintains that homogeneous jurisdictions’ decentralized choices are likely to be socially optimal because...

One consequence of decentralized responsibility to set tax policy and environmental standards is that local governments might try to attract industry and jobs by underproviding local public goods with lower taxes or lax environmental standards or both. But if local authorities exploit fixed...