The California effect is the shift of consumer, environmental and other regulations in the direction of political jurisdictions with stricter regulatory standards. The name is derived from the spread of some advanced environmental regulatory standards that were originally adopted by the U.S. state of

California California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the ...

and eventually adopted in other states. This spread is supported by large corporations, which stand to gain as they have the resources necessary to deal with the regulations, unlike their smaller competitors. This process is the opposite of the

Delaware Delaware ( ) is a state in the Mid-Atlantic region of the United States, bordering Maryland to its south and west; Pennsylvania to its north; and New Jersey and the Atlantic Ocean to its east. The state takes its name from the adjacen ...

effect Effect may refer to: * A result or change of something ** List of effects ** Cause and effect, an idiom describing causality Pharmacy and pharmacology * Drug effect, a change resulting from the administration of a drug ** Therapeutic effect, a b ...

; this is simply the

race to the bottom Race to the bottom is a socio-economic phrase to describe either government deregulation of the business environment or reduction in corporate tax rates, in order to attract or retain usually foreign economic activity in their jurisdictions. While ...

in which different countries (or states in the case of Delaware) are simply reducing their regulatory burden to attract more of the businesses into their jurisdiction. The assumption behind the Delaware effect is that in the competitive regulatory environment, governments have to remove their regulatory barriers to allow easier functioning of their corporations and to attract new companies to establish their business. While additional regulation can prove to be a burden for any corporation, higher regulatory standards can be a solution to certain

externalities In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...

which are decreasing the total public good. This term is mostly associated with David Vogel who called this phenomenon the "California effect". The actual existence of this effect in the real world is disputed. While there is large discussion on the possible race to the bottom among countries competing for attention of internationally mobile capital, there seems to be some limited evidence that at least in some sectors the California effect can be observed.

References

{{reflist Environmental law Politics of California Environment of California

See also

References