Strategic interaction and the determination of environmental policy across US states

We examine whether U.S. states are engaged in strategic environmental policymaking. In particular, do states incorporate the stringency of environmental policies in neighboring states into their own decision calculus? Our analysis suggests that states are influenced by their neighbors-both contiguous and regional neighbors-and the effect operates within a five year window. Moreover, the response is asymmetric. States are pulled to higher levels of abatement costs by improvements in neighbors with regulations that are already relatively stringent. Improvements by states with relatively tax regulations have no effect on their neighbors' environmental policymaking. (C) 2001 Elsevier Science.