Economics at your fingertips  

Evaluating the efficiency and equity of federal fiscal equalization

David Albouy ()

Journal of Public Economics, 2012, vol. 96, issue 9-10, 824-839

Abstract: Theoretically, federal transfers that make household location decisions efficient should ignore local cost differences, subsidize positive externalities, and offset differences in federal-tax payments and local taxes levied on non-residents, but not local tax revenues from residents. Transfers that redistribute resources equitably across regions will likely target areas with individuals of low earnings potential or low real incomes. Applying these criteria empirically, Canadian equalization policy appears neither efficient nor equitable, but exacerbates pre-existing inefficiencies and underfunds minorities. Locational inefficiencies cost Canada 0.41% of income annually and cause over-funded provinces to have populations of 30% beyond their efficient long-run levels.

Keywords: Fiscal equalization; Federal taxation; Source-based and residence-based taxes; Horizontal equity; Cost-of-living; Compensating wage differentials (search for similar items in EconPapers)
JEL-codes: H24 H5 H77 J61 R1 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Evaluating the Efficiency and Equity of Federal Fiscal Equalization (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jpubeco.2012.05.015

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

Page updated 2021-06-10
Handle: RePEc:eee:pubeco:v:96:y:2012:i:9:p:824-839