The Interregional Incidence of Public Budgets in Federations: Measurement Issues, Evidence from Canada, and Policy Relevance
AbstractIn this paper, we examine the issue of the incidence of central government budgets in federal countries. In Section 1, we discuss a number of reasons why the picture painted of reality by even the best fiscal flow analysis is inevitably partial and hence inherently flawed to an unknowable extent. Despite these cautions, in Section 2 we review the evidence on the regional incidence of federal budgets in Canada, considering both aggregate results and some specific federal expenditure programs (e.g. equalization and employment insurance), as well as some relevant issues (e.g. the regional effect of some regulatory programs) not depicted in fiscal flows. We find that the regional distributional patterns revealed in this analysis are both robust to various reasonable adjustments and relatively stable over time. Nonetheless, we conclude in Section 3 that, while such studies are potentially useful in terms of providing a base-line for assessing performance in some respects, they cannot be used to demonstrate that e.g. one region is paying (or receiving) 'too much' or 'too little', let alone that there is a 'fiscal imbalance' that needs to be corrected. Numbers are necessary, and good numbers are better than bad ones; but they have to be interpreted carefully and in context before drawing any policy conclusions.
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Bibliographic InfoPaper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number 0510.
Length: 42 Pages
Date of creation: Apr 2005
Date of revision:
regional fiscal flows; regional incidence; fiscal balance; Canada;
Find related papers by JEL classification:
- H19 - Public Economics - - Structure and Scope of Government - - - Other
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
- P43 - Economic Systems - - Other Economic Systems - - - Finance; Public Finance
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- Richard M Bird & Andrey V Tarasov, 2004.
"Closing the gap: fiscal imbalances and intergovernmental transfers in developed federations,"
Environment and Planning C: Government and Policy,
Pion Ltd, London, vol. 22(1), pages 77-102, February.
- Richard Bird & Andrey Tarasov, 2002. "Closing the Gap: Fiscal Imbalaces and Intergovernmental Transfers in Developed Federations," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0202, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Singh, Nirvikar & Rao, Govinda, 2006. "Political Economy of Federalism in India," OUP Catalogue, Oxford University Press, number 9780195686937.
- Richard M. Bird, 2003. "Fiscal Flows, Fiscal Balance, and Fiscal Sustainability," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0302, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Richard M. Bird & Francois Vaillancourt, 2005. "Changing with the Times: Success, Failure and Inertia in Canadian Federal Arrangements, 1945-2002," International Tax Program Papers 0504, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
- Enid Slack, 2006. "Cities in Canadian Federalism," International Tax Program Papers 0603, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
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