Race to the bottom
When buyers, firms or capital can move to whichever jurisdiction asks least of them, each jurisdiction's best move is to ask less than its rivals, so standards fall below what any of them wanted.
Often misread asAssuming the outcome whenever jurisdictions compete, without checking whether the thing being competed for actually relocates in response to the standard being cut.
How to see it
It only runs if the prize actually moves
When the thing being competed for can relocate to whichever jurisdiction demands least of it, each jurisdiction finds that undercutting its rivals attracts it. Every jurisdiction reasons the same way, so standards fall everywhere and nobody ends up with the advantage they were chasing.
The checkIt needs the mobile party to be choosing on the basis of the lowered standard. Where it chooses on infrastructure, market access or skills, competition can push standards up instead.
Try itName the thing that moves and the standard being cut. Then ask whether firms really relocate for that standard. If the honest answer is that they relocate for the labour market, you have reached for the wrong model.
Know these first
Easily confused with
Sources
- Cary, W. L. (1974). Yale Law Journal 83(4), 663-705.