Who's Responsible? How the Assignment of Regulatory Authority Influences Regulatory Effort

This paper analyzes how choices involving the assignment of authority for public goods provision to alternative sets of jurisdictions within a multi-tiered government affect both the average quantity of the public good provided as well as the variation of that quantity across jurisdictions. An empirical illustration considers the example of the California hazardous waste program. This situation is unique because jurisdiction decisions to volunteer for provision, decisions to devolve authority, and a policy outcome (regulatory effort) are all observed. Using a trivariate probit model that jointly models the city and county authority decisions and the level of regulatory effort, we test a number of theoretical hypotheses developed by the author (2001) that predict politicians' authority decisions will depend on differences in jurisdiction preferences over the level of the public good, as well as their regulatory costs, size and interest group dynamics. We find that cities will volunteer when they are small relative to the county, have a strong fiscal base, and if regulated industries are weak. This paper also extends the political economy literature by allowing an examination of how the rules of the authorization process affect a policy outcome (in this case, regulatory effort). We simulate forecasted inspection rates if all cities that petition are allowed to implement their own hazardous waste program. The simulation shows that the authorization process has a significant effect on policy outcomes-the mean inspection rate is higher but compliance with state minimum standards is significantly lower than was the case with the actual rules.