Why might states compete with one another in a federal system?

States compete with one another in a federal system primarily to attract resources, investments, and residents through favorable policies. This competition drives states to create attractive business environments, improve infrastructure, or offer enticing tax incentives to lure businesses and individuals from other states. By implementing favorable policies, states aim to enhance their economic growth and improve the quality of life for their residents, which in turn can lead to a larger tax base and better public services.

This phenomenon is often referred to as "competitive federalism," where states act as laboratories of democracy, testing different approaches to governance and policy. The success of these policies can lead to increased populations and investment, creating a cycle of growth and opportunity that can benefit the state overall.

The other options do not properly capture the motivations behind state actions in a competitive federal system. Creating a unified national policy would limit the unique policies each state can implement. Ensuring equal distribution of federal funding could diminish the incentive for states to innovate or compete. Increasing federal control over state affairs would undermine the autonomy of states and reduce the competitive nature that exists in a federal system.