Are Equalization Payments Making Canadians Better Off? A Two-Dimensional Dominance Answer
AbstractThis 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.
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Bibliographic InfoPaper provided by Institut d'economie publique (IDEP), Marseille, France in its series IDEP Working Papers with number 0608.
Length: 36 pages
Date of creation: 15 Nov 2006
Date of revision: 15 Nov 2006
Equalization; Welfare Dominance; Multidimensional Distribution; Public Goods; Fiscal Federalism.;
Other versions of this item:
- Benoît Tarroux, 2012. "Are equalization payments making Canadians better off? A two-dimensional dominance answer," Journal of Economic Inequality, Springer, vol. 10(1), pages 19-44, March.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H4 - Public Economics - - Publicly Provided Goods
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-13 (All new papers)
- NEP-PBE-2007-07-13 (Public Economics)
- NEP-UPT-2007-07-13 (Utility Models & Prospect Theory)
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