In your example of Maryland and Virginia and universal healthcare, Maryland will continually need to ensure they're collecting enough money (i.e., through taxes of some sort) to pay for universal healthcare. If an influx of unhealthy people enter the state, they'll have to increase taxes to pay for the higher healthcare bills, which will in turn make them less competitive with other states, and cause people to leave. There's no way Maryland adds universal healthcare and remains equal in all other categories.

In your example of child labor, it's arguably better for everyone if Virginia can produce cheaper goods. (Please don't think I'm in any way arguing for child labor.) Maryland benefits from the cheaper goods as well, and is able to free resources for other pursuits that are economically advantageous for them. We already see this to a degree in places that have an abundance of a natural resource – it's cheaper and more efficient for them to export the resource than it is for other places that don't have the resource.