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

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Author Info
Benoit Tarroux ()

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

Find related papers by JEL classification:
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 and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. François Bourguignon & Satya R. Chakravarty, 2002. "Multi-dimensional poverty orderings," DELTA Working Papers 2002-22, DELTA (Ecole normale supérieure). [Downloadable!]
  2. Atkinson, Anthony B & Bourguignon, Francois, 1982. "The Comparison of Multi-Dimensioned Distributions of Economic Status," Review of Economic Studies, Blackwell Publishing, vol. 49(2), pages 183-201, April. [Downloadable!] (restricted)
  3. Maasoumi, Esfandiar, 1986. "The Measurement and Decomposition of Multi-dimensional Inequality," Econometrica, Econometric Society, vol. 54(4), pages 991-97, July. [Downloadable!] (restricted)
  4. John A. Weymark, 2003. "The Normative Approach to the Measurement of Multidimensional Inequality," Working Papers 0314, Department of Economics, Vanderbilt University, revised Jan 2004. [Downloadable!]
  5. Robin Boadway, 2003. "The Theory and Practice of Equalization," Working Papers 1016, Queen's University, Department of Economics. [Downloadable!]
  6. Davidson, Russell & Duclos, Jean-Yves, 1998. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," Cahiers de recherche 9805, Université Laval - Département d'économique. [Downloadable!]
    Other versions:
  7. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April. [Downloadable!] (restricted)
  8. R. Boadway & K. Cuff & M. Marchand, 2001. "Equalization and the Decentralization of Revenue-Raising in a Federation," Department of Economics Working Papers 2001-04, McMaster University. [Downloadable!]
    Other versions:
  9. Gravel, Nicolas & Poitevin, Michel, 2006. "The progressivity of equalization payments in federations," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1725-1743, September. [Downloadable!] (restricted)
    Other versions:
  10. Bourguignon, F. & Chakravarty, S.R., 1998. "The Measurement of Multidimensional Poverty," DELTA Working Papers 98-12, DELTA (Ecole normale supérieure).
    Other versions:
  11. Kathleen M. Day, 1992. "Interprovincial Migration and Local Public Goods," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 123-44, February. [Downloadable!] (restricted)
  12. Foster, James E, 1998. "Absolute versus Relative Poverty," American Economic Review, American Economic Association, vol. 88(2), pages 335-41, May. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September. [Downloadable!] (restricted)
  15. Jean-Yves Duclos & David E. Sahn & Stephen D. Younger, 2006. "Robust Multidimensional Poverty Comparisons," Economic Journal, Royal Economic Society, vol. 116(514), pages 943-968, October. [Downloadable!] (restricted)
    Other versions:
  16. 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. [Downloadable!] (restricted)
  17. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February. [Downloadable!] (restricted)
  18. Russell Davidson, 2006. "Stochastic Dominance," Departmental Working Papers 2006-19, McGill University, Department of Economics. [Downloadable!]
  19. Kathleen M. Day & Stanley L. Winer, 2001. "Policy-induced Migration in Canada: An Empirical Study," Carleton Economic Papers 01-08, Carleton University, Department of Economics. [Downloadable!]
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