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Regulation under Economic Globalization

Johannes Urpelainen
DOI: http://dx.doi.org/10.1111/j.1468-2478.2010.00628.x 1099-1121 First published online: 1 December 2010

Abstract

How does economic globalization shape the regulations that states enact to control negative externalities? Previous research downplays the role of international cooperation and the present historical context, so it cannot offer a coherent theoretic account of the empirical record. I construct a formal model in which states can engage in regulatory cooperation to coordinate their policies. I prove three main results. First, a “race to the bottom” is unlikely because it requires non-cooperative adjustments by industrialized countries. Second, a partial “race to the top” is likely because many emerging countries stand to gain from reduced negative externalities and the competitiveness problem is limited when the most lucrative export markets are already regulated. Finally, powerful industrialized countries with a high regulatory capacity benefit from a global expansion of regulation.

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