Are Equalization Payments Making Canadians Better Off? A Two-Dimensional Dominance Answer

Benoît Tarroux

No 608, IDEP Working Papers from Institut d'economie publique (IDEP), Marseille, France

Abstract: This paper provides a normative appraisal of the Canadian equalization transfers system. For that sake, the two-dimensional dominance criteria introduced by Atkinson and Bourguignon(RES, 1982) are used to compare the distributions of private and public good before and after equalization payments. As the distribution before equalization is not observable, one simulates it on the basis of various scenarios which specify both its financing by the federal government and its utilization by provincial governments. The results show that Canadian equalization payments never improve social welfare for all utilitarian social planners who believe that household convert public and private goods into well-being by a utility function belonging to the classes that corresponds to the Atkinson and Bourguignon criteria. A further parametric restriction on the class of utility functions however enables to get more precise results.

Keywords: Equalization; Welfare Dominance; Multidimensional Distribution; Public Goods; Fiscal Federalism. (search for similar items in EconPapers)
JEL-codes: D31 D63 H4 H77 I38 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2006-11-15, Revised 2006-11-15
New Economics Papers: this item is included in nep-pbe and nep-upt
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Related works:
Journal Article: Are equalization payments making Canadians better off? A two-dimensional dominance answer (2012)
Working Paper: Are equalization payments making Canadians better off? A two-dimensional dominance answer (2012)
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