Financing Confederation Revisited: The Economic State of the Federation
In: The State of Economics in Canada: Festschrift in Honour of David Slater
AbstractRobin Boadway examines the development of fiscal arrangements and considers the substantial fiscal decentralization that has occurred in Canada over the past 20 years. Boadway makes the case that the fiscal arrangements have played an important role in improving the performance of the Canadian economy with respect to both equity and efficiency. But he also observes that over this period our federation has become the most decentralized federation in the world. Looking forward, he sees major challenges facing the fiscal arrangements. The equalization system and the political will to maintain it are in peril at the same time as disparities are likely to increase. The federal government has effectively lost control of the spending power, which has historically been one of the most powerful instruments at the hands of the federal government for managing the federation. This has left the federal government with no effective mechanism for managing the economic union. The income tax system is becoming disharmonized as provinces are engaged in competitive reductions in income tax progressivity. Attempts to arrive at cooperative solutions by federal-provincial negotiation have not been successful. Boadway believes that the decentralized Canadian federation could evolve into one in which the provinces behave “cooperatively” with respect to the national objectives of equity and efficiency. However, he sees little evidence that this is happening, and argues that an overall vision is needed. Unfortunately, Canada does not have an institution like the former Economic Council that is currently capable of developing such a vision.
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This chapter was published in: Patrick Grady & Andrew Sharpe (ed.) The State of Economics in Canada: Festschrift in Honour of David Slater, Centre for the Study of Living Standards, pages 37-56, 2001.
This item is provided by Centre for the Study of Living Standards in its series The State of Economics in Canada: Festschrift in Honour of David Slater with number 03.
Find related papers by JEL classification:
- O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
- D60 - Microeconomics - - Welfare Economics - - - General
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- Robin Boadway and Michael Keen, .
"Efficiency and the Optimal Direction of Federal-State Transfers,"
Economics Discussion Papers
445, University of Essex, Department of Economics.
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- Baker, Michael & Payne, A. Abigail & Smart, Michael, 1999.
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- Michael Baker & Abigail Payne, 1998. "An empirical study of matching grants: The "cap on CAP"," Working Papers msmart-98-03, University of Toronto, Department of Economics.
- BOADWAY, Robin & MARCHAND, Maurice & VIGNEAULT, Marianne, .
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- Boadway, Robin & Marchand, Maurice & Vigneault, Marianne, 1998. "The consequences of overlapping tax bases for redistribution and public spending in a federation," Journal of Public Economics, Elsevier, vol. 68(3), pages 453-478, June.
- BOADWAY, Robin & MARCHAND, Maurice & VIGNEAULT, Marianne, 1998. "The consequences of overlapping tax bases for redistribution and public spending in a federation," CORE Discussion Papers 1998003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- repec:fth:louvco:9803 is not listed on IDEAS
- William G. Watson, 1986. "An Estimate of the Welfare Gain from Fiscal Equalization," Canadian Journal of Economics, Canadian Economics Association, vol. 19(2), pages 298-308, May.
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