While the upshot of Tiebout’s model is generally positive, firms’ and individuals’ mobility across the federal system can also have negative consequences. Government competition for mobile individuals and firms can lead to a regulatory “race to the bottom” to the extent that governments seek to attract business investment, and believe that they can do so by relaxing regulations relative to competing federal units . Competition might lead governments to converge on lower regulatory stringency than that preferred by constituents, as officials trade off public interest regulations for greater business investment and growth. While empirical evidence demonstrating a regulatory “race to the bottom” in American federalism is mixed, there is some evidence of these dynamics affecting decisions in environmental policy and welfare policy among other areas. These models of competition imply a general logic of policy diffusion, as policy adoption in one unit exerts pressure on competing units to adopt that same policy. Failure to keep up imposes costs on polities in loss of investment or residents. And similar to political learning, competition is considered to be a core mechanism of policy diffusion .But again, there is reason to think that polarization might blunt the effects of competition on policy diffusion. Under polarization and nationalization ,vertical grow room design the transformation of state elections into referenda on the national parties reduces the incentive of state lawmakers to respond to competitive pressures through policy change. The third broad mechanism of policy interdependence identified in existing literature is firm preferences for unified standards.
Due to the “marble-cake” structure of American federalism , whereby different levels of government share regulatory authority , large firms are often regulated at multiple levels of government. Since these firms can face costs from complying with regulations that differ across sub-national units, national standards are generally preferred to state patchworks. Firms, therefore, might respond to the adoption of sub-national regulations by advocating for federal policies that provide a unified regulatory landscape and potentially pre-empt future sub-national regulations. Elliott, Ackerman, and Millian’s seminal legal study highlights the role of mobilization of regulated industries in response to sub-national regulations in the passage of both the Motor Vehicle Pollution Act of 1965 and the Air Quality Act of 1967. In political science literature, the upward diffusion of standards due to the advocacy of regulated industries is associated with Vogel’s concept of the “California effect” . In a key empirical contribution, Vogel argues industry support for federal standards drove the upward diffusion of California’s auto emissions standards. While the mechanisms of political learning and competition are driven by shifts in lawmakers’ beliefs about which policies will best serve their constituents, this third mechanism is driven by shifts in firm preferences. The theoretical dynamic I propose in this paper similarly examines how sub-national policies affect the mobilization of organized interests in other federal units. But, instead of studying how sub-national policies shift national-level preferences, I consider how sub-national policies affect the capacities of organized interests—and in turn their ability to mobilize resources to influence policy making across the federal system . By examining the role of interest group influence in driving policy interdependence, the perspective I put forward here also relates to the literature on the role of interest groups in mediating policy diffusion .
The key difference is that, while this literature treats interest groups as exogenous, I argue that the capacities of interest groups to influence policy is endogenous to prior policy decisions adopted in other federal units. My theoretical argument draws directly from scholarship in the policy feedback literature examining the effects of public policies on organized interests. Much of this work examines how social welfare policies motivate beneficiaries or potential beneficiaries to organize into citizens groups to protect their benefits . A rich body of literature has also explored how policies shape the emergence and growth— and political capacities—of organized economic interests: particularly, businesses and unions . Businesses and unions are classic organized vested interests: groups that receive material benefits directly from particular policies and institutions, and can funnel resources back into the political system to shape policy trajectories . Market rules influence which firms and industries grow , and as a result which will have resources to engage in politics. Similarly, policies like collective bargaining rules directly shape the organizational strength and political power of unions . Though the seminal policy feedback studies examine national policies , some recent scholarship has explored how the institution of federalism interacts with policy feedback dynamics . Studying Medicaid, Michener argues that social welfare policy variation across the states produces variation in individual-level political behavior across the states. Research focused on organized interests has a similar implication: variation in policy environments across the states, by shaping the relative strength of different organized interests, produces variation in political environments across the states. For instance, studying neighboring counties across state borders, Feigenbaum, Hertel-Fernandez, and Williamson find that the enactment of right-to-work laws affected elections by reducing union strength and political capacity.
Unlike these contributions, my goal is not to better understand how policies produce variation in politics across the states, but rather to better understand interdependent policy making in American federalism. Policy feedback theory, I argue, offers unrealized potential for expanding our understanding of interdependence. A key tenet of the policy feedback literature is that the organized interests that benefit from particular policies are likely to have greater resources to defend those policies in future political rounds—producing a self-reinforcing feedback cycle. But, in a decentralized political system, groups might have an incentive not only to defend the sub-national policies that benefit them, but also to seek to spread them. This is particularly relevant to economic interests , for whom the diffusion of favorable policies can drive revenue growth. The structure of regulation in the US is what gives organized interests the incentive to leverage resources accumulated from a favorable reform in one sub-national unit to engage politically in other units and federally. This structure advantages groups that are able to engage at multiple sites and levels of government to achieve policy goals and defend against threats . Recent literature has illuminated how organized interests deploy resources strategically across the federal system. Studying teachers unions, Moe documents how the National Education Association, recognizing the threat to the viability of its Utah affiliate, leveraged resources drawn from its California affiliate to block a 2007 pro-voucher ballot initiative proposed in Utah. Similarly, in recent work, Finger and Hartney demonstrate that teachers unions systematically transfer finances to states where labor laws are weakened to ensure their affiliates remains viable. One of the key insights in this literature is that unions recognize that their strength—and ability to influence politics and policy—depends on maintaining favorable policy environments across the federal system . While there is less work on firms, Stokes reports, using first-hand interviews,grow vertical that renewable energy advocates understood the importance of resources and expertise gained in states with favorable policy environments for expanding into other states. The notion that organized interests deploy resources strategically across the federal system—put together with the insight from the policy feedback literature that policies can shape the resources organized interests have at their disposal to engage politically—suggests that state policies can have intergovernmental effects on interest group politics. More specifically, when states adopt policy reforms, the groups that benefit might leverage their newfound strength to seek to propagate those reforms across and up the federal system.
These intergovernmental policy feed backs, or “policy feedback spillovers” , can manifest horizontally and vertically . This paper focuses on horizontal feedback via interest group mobilization across the states.Mechanisms of cross-state feedback are clearest for economic interests operating in multiple states, which are directly affected by policies adopted in each of the states where they operate. The groups that benefit from, and are strengthened by, policy reform adopted in one state have greater capacity to engage politically in others —and might advance similar reforms to those previously adopted in the first state. Operating across multiple states is not a pre-condition for these dynamics. Economic interests often seek to expand geographically across the states, and an expansion-minded group might leverage resources gained from favorable policy reforms in one state to seek to shift policy and construct new markets. For instance, as I will discuss, rooftop solar installers in several cases lobbied in states where they were not operating to promote policy shifts that would allow them to profitably expand. Because lobbying is generally highly effective at the sub-national level —where voters are less capable of holding politicians accountable for representing their preferences —firms’ political efforts might bear fruit even in federal units where they do not have an economic presence. In addition to shaping the resources that firms have at their disposal to engage politically across the federal system, state policies can also shape the composition of the broader advocacy environment by incubating new economic interests.
While scholars have long argued that a benefit of federalism is the potential for learning from sub-national experimentation , another feature of federalism is that variation in policy landscapes can promote greater diversity in the landscape of organized interests that emerge. Sub-national units offering favorable policy environments can provide emergent business interests with “beach-heads” from which they can expand across the federal system . To the extent that these firms are able to expand beyond their beachheads, their political influence might expand to other locales as well. While this paper focuses on economic interests, some of the mechanisms outlined above are also relevant to citizens groups. Like firms and unions, some citizens groups depend on particular public policies to grow and accumulate resources ,and many operate across multiple federal units . Even more broadly, this theoretical perspective relates to literature on how externally adopted policies can influence public opinion, and thereby lead to policy diffusion . The perspective put forward here, like the work in the literature on public opinion as a diffusion mechanism, confounds the traditional distinction made by Berry and Berry between external and internal determinants of policy decisions. Indeed, it shows that external policies can subsequently affect internal determinants .8 What are the political and policy implications of these intergovernmental policy feed backs on interest group politics? In addressing this question, policy diffusion is the logical place to start. Building on seminal work from Crain , diffusion has been the core theoretical and empirical framework by which scholars have analyzed political and policy interdependence across the US federal system . The empirical framework of policy diffusion scholarship, where scholars examine the effect of policy passage in one federal unit on the likelihood of passage in another, aligns with existing theoretical mechanisms of policy interdependence in the literature. As I discuss above, the mechanisms of learning, competition, and firm preferences for unified standards all promote policy diffusion. The intergovernmental feed backs studied here can also lead to policy diffusion. An organized interest that benefits and draws resources from a policy adopted in one state might leverage those resources to advocate for the adoption of that same policy elsewhere. But organized interests might also respond to varying political , institutional , and economic environments by advocating for different policies in different locales. As a result, policy feedback can also produce a wider range of intergovernmental policy making outcomes depending on how organized interests deploy their resources across the federal system. Studying these effects therefore requires attention to the engagement of organized interests , and attention to the total political implications of organized group engagement. The empirical portion of the paper follows this framework by examining how state policies affect interest group engagement, and ultimately policy and political outcomes, in other states in the case of rooftop solar policy. To be clear, the theoretical argument suggests policy feedback mechanisms can operate in addition to, not instead of, conventional diffusion mechanisms of learning and competition. Therefore, in the empirical analysis, I do not aim to show that mechanisms of learning and competition have been absent , but rather to show that mechanisms of cross-state policy feedback have played an important role in the politics of rooftop solar. Distributed and rooftop solar has grown rapidly over the past decade.