The Economics of Constitutional Change: Dividing the Federal Debt

Paul Boothe and Richard Harris

Canadian Public Policy, 1991, vol. 17, issue 4, 434-444

Abstract: In this paper the authors consider both the transitional and long-run implications of one aspect of changing Canada's constitutional structure--dividing the federal debt. They argue that it may be very difficult to agree on a division formula and particular regions may have strong incentives to frustrate agreement. The divided debt may carry substantial risk premiums. Designing institutions to effect the division will require an unprecedented degree of co-operation and risk sharing among the regions. Finally, post-division forces may engender large-scale migrations of labor and capital from some regions.

Date: 1991
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