What is the definition of "competitive federalism?"

Answer

Cornell University defines federalism as an arrangement of governmental authority in which multiple levels of government share overlapping jurisdictions or territories. Competitive federalism means that jurisdictions also compete on policy matters to attract citizens, investment or both.

According to First Principles, the United States provides a leading example of competitive federalism. Not only does the U.S. political system exhibit the vertical power sharing between the federal and state governments known as dual federalism, which is typical of federalist systems, but it is also horizontally competitive because state governments compete with other states.

Rather than collude and coordinate, state governments set tax rates and adopt regulatory policies to maximize their own performance. Because citizens and businesses can live and operate where they choose, they are able to "vote with their feet" for the policies they find most preferable. States then have an incentive to adopt policies more likely to attract citizens and businesses.

Federalism is not always competitive, notes USLegal. Whereas the early United States operated under the dual federalist model, where the jurisdictions of state and national governments are strictly defined and separated, it has since been turned into a more cooperative system. Under this model, responsibility is shared by the various levels of government. No one level typically has an exclusive claim to one issue.

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