Jurisdiction shopping

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Jurisdiction shopping is a form of economic behavior by which a private business interest seeks to locate its operations in a political unit with the least regulation and/or lowest costs, such as property taxes and impact fees. It is most common on the local level.

In the 1960s and 1970s, it was strongly advocated by the school of economists that eventually became known as the public choice movement, with the justification that it was perfectly rational--the neoclassical notion of perfect competition writ large. Since businesses would all relocate to the cheapest jurisdictions, localities would be forced to lower their "barriers to entry," leading to greater overall economic efficiency. However, urban economists and scholars of urban planning and others have criticized jurisdiction shopping, which tends to ignore regional concerns and externalities such as air pollution and traffic congestion, as an example of market failure, since it can often lead to collectively irrational outcomes such as the "tragedy of the commons."

Jurisdiction shopping is also practiced by various criminal organizations that find the jurisdiction with less enforcement or regulation or corrupt officials that can be bribed. Choosing such a jurisdiction also makes it hard or impossible to sue the criminal. For example, diploma mills are often operated from diploma mill-friendly countries such as the United States, where there is a lack of government regulation.