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 c apital owner lobby,groups that seek influence by offering political contrib utions. Worker lobbying in the decentralized case has an effect on environm ental regulations identical to that of capital owner lobbying in the centra lized case. This is because the aggregate effects of environmental regulati ons on income are equivalent under the two institutional designs. Whereas w orkers carry the full burden in the decentralized case when capital competi tion occurs, the burden is shaved with the capital owners in the centralize d case. We present evidence consistent with our theory. (JEL Q28, F21, R38, D72, D78).