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Channels of risk-sharing among Canadian provinces: 1961–2006

  • Faruk Balli

    ()

  • Syed Basher

    ()

  • Rosmy Jean Louis

    ()

This article incorporates recent developments in the literature to quantify the amount of interprovincial risk-sharing in Canada. We find that 29% of shocks to gross provincial product are smoothed by capital markets, 27% are smoothed by the federal tax-transfer systems, and about 24% are smoothed by credit markets. The remaining 20% are not smoothed. Our results bring to light the critical role that Alberta plays in trading-off credit market smoothing for more capital market risk-sharing with the rest of Canada. Our pairwise risk-sharing analysis has brought up some interesting questions and arguments that are often neglected in discussions of regional risk-sharing. For example, one aspect of the pairwise analysis sheds light on the assessment of the economic effects of Quebec separation. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00181-011-0488-6
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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 43 (2012)
Issue (Month): 2 (October)
Pages: 763-787

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Handle: RePEc:spr:empeco:v:43:y:2012:i:2:p:763-787
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