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

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  • Benoit Tarroux

    ()
    (GREQAM-IDEP and Université de la Méditerranée)

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.

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Bibliographic Info

Paper provided by Institut d'economie publique (IDEP), Marseille, France in its series IDEP Working Papers with number 0608.

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Length: 36 pages
Date of creation: 15 Nov 2006
Date of revision: 15 Nov 2006
Handle: RePEc:iep:wpidep:0608

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Keywords: Equalization; Welfare Dominance; Multidimensional Distribution; Public Goods; Fiscal Federalism.;

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  1. Duclos, Jean-Yves & Sahn, David & Younger, Stephen D., 2001. "Robust Multidimensional Poverty Comparisons," Cahiers de recherche 0115, Université Laval - Département d'économique.
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  17. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November.
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Cited by:
  1. Rongili Biswas & Nicolas Gravel & Rémy Oddou, 2013. "The segregative properties of endogenous formation of jurisdictions with a welfarist central government," Social Choice and Welfare, Springer, vol. 41(2), pages 293-319, July.

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