Money and cooperative federalism: evidence from EPA civil litigation

The federalism structure of the US government requires active cooperation from state governments to successfully enforce federal environmental regulations. What explains the variation in state governments' participation in lawsuits against firms that are accused of violating major environmental statutes? We argue that firms' political connections with state politicians affect a state government's decision to join the litigation process. By constructing a novel dataset on the EPA's civil cases and settlements for the period 1998-2021, we show that state environmental agencies are less likely to join the EPA in court when the defendant firms contributed to Republican state legislators. We do not find the same pattern when firms have connections with Democratic legislators. We present various mechanisms of how state politicians influence behaviors of state bureaucrats. Our findings highlight how state politics can be an avenue for firms to exert influence on federal environmental regulations.