The California effect is the shift of consumer, environmental and other regulations in the direction of political jurisdictions with stricter regulatory standards.
The assumption behind the Delaware effect is that in the competitive regulatory environment, governments have to remove their regulatory barriers to allow easier functioning of their corporations and to attract new companies to establish their business.
While additional regulation can prove to be a burden for any corporation, higher regulatory standards can be a solution to certain externalities which are decreasing the total public good.
This term is mostly associated with David Vogel who called this phenomenon the "California effect".
While there is large discussion on the possible race to the bottom among countries competing for attention of internationally mobile capital, there seems to be some limited evidence that at least in some sectors the California effect can be observed.