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

Syed A. Basher, Faruk Balli and Rosmy Louis

MPRA Paper from University Library of Munich, Germany

Abstract: This paper incorporates recent developments in the literature to quantify the amount of interprovincial risk-sharing in Canada. We find that both capital market and the federal tax-transfer system play an almost equally important role (about 26 percent each) in smoothing shocks to gross provincial product, while only 18 percent of shocks are smoothed by credit markets. The remaining 30 percent 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 to 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.

Keywords: Risk-sharing; pairwise risk-sharing; federal taxes and transfer; panel data; cross-section dependence. (search for similar items in EconPapers)
JEL-codes: C33 E21 F36 H77 (search for similar items in EconPapers)
Date: 2009-08
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Channels of risk-sharing among Canadian provinces: 1961–2006 (2012)
Working Paper: Channels of risk-sharing among Canadian provinces: 1961--2006 (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17300

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