“Beggar thy Neighbor:” Testing for Free Riding in State-Level Endangered Species Expenditures

An important public policy question that remains unresolved iswhether devolution will enhance sensible policy making byexploiting informational asymmetries or, instead, trigger a``beggar thy neighbor'' response and stimulate free ridingamongst localities. We analyze this question within theframework of U.S. environmental policymaking by scrutinizing aunique panel data set on state-level endangered speciesexpenditure patterns. Our empirical estimates are consistentwith the notion that states free ride, which may lead to anexpenditure equilibrium that is not Pareto efficient.