An Evaluation Of The Stabilization Properties Of Equalization In Canada

Robin Boadway and Masayoshi Hayashi

No 1015, Working Paper from Economics Department, Queen's University

Abstract: The Canadian system of equalization is designed to address differences in revenue-raising capacity across provinces, basing a province's entitlements on its actual tax bases. However, since it does so on a year-on-year basis, the standard against which a given province's equalization entitlements are calculated fluctuates from year to year with all provinces' tax bases and tax rates. The consequence is that, while the redistribution function is fulfilled annually, the stability of provincial revenues suffers. The evidence we present indicates that, at least for the three revenue categories we examine, the equalization system can actually be destabilizing, thereby imposing on provinces variability in their potential revenue streams that exceeds what would exist in the absence of equalization.

Keywords: Interregional Redistribution; Stabilization; Equalization; Intergovernmental Transfers (search for similar items in EconPapers)
JEL-codes: H77 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2003-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1015.pdf First version 2003 (application/pdf)

Related works:
Journal Article: An Evaluation of the Stabilization Properties of Equalization in Canada (2004)
Working Paper: An Evaluation Of The Risk-sharing Function Of Equalization In Canada (2002)
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