Channels of risk-sharing among Canadian provinces: 1961–2006

Faruk Balli, Syed Basher () and Rosmy Jean Louis ()

Empirical Economics, 2012, vol. 43, issue 2, 763-787

Abstract: This article incorporates recent developments in the literature to quantify the amount of interprovincial risk-sharing in Canada. We find that 29% of shocks to gross provincial product are smoothed by capital markets, 27% are smoothed by the federal tax-transfer systems, and about 24% are smoothed by credit markets. The remaining 20% are not smoothed. Our results bring to light the critical role that Alberta plays in trading-off credit market smoothing for more capital market risk-sharing with the rest of Canada. Our pairwise risk-sharing analysis has brought up some interesting questions and arguments that are often neglected in discussions of regional risk-sharing. For example, one aspect of the pairwise analysis sheds light on the assessment of the economic effects of Quebec separation. Copyright Springer-Verlag 2012

Keywords: Risk-sharing; Pairwise risk-sharing; Federal taxes and transfer; Panel data; Cross-sectional dependence; C33; E21; F36; H77 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (19)

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Working Paper: Channels of risk-sharing among Canadian provinces: 1961--2006 (2011)
Working Paper: Channels of risk-sharing among Canadian provinces: 1961–2006 (2009)
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DOI: 10.1007/s00181-011-0488-6

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