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Give and take? Child benefits and prices in Northern Canada

Author

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  • Nicholas Li
  • Angela Daley
  • Barry Watson

Abstract

Cost of living is comparatively high in Northern Canada, which is a remote and sparsely populated region served by retail oligopolies (about 34% of communities feature a monopoly, while the rest feature a duopoly). Government transfers constitute a large share of household income in Northern communities, and child benefits are particularly important, with these programs having expanded in recent years (Universal Child Care Benefit in 2015 and Canada Child Benefit in 2016). We assess the extent to which increased child benefits are “captured” by higher prices. Using the Longitudinal Administrative Database and community‐level data on prices and food shipments from Nutrition North Canada (2012–2019), we find that expanded child benefits are associated with higher prices (with an elasticity of 0.02), which for a family of four offset about 24% of the increased purchasing power resulting from the expansion. Our results suggest that expanded child benefits increase food demand and that the main transmission mechanism leading to higher prices is markups, as our price effects hold conditional on the quantity of food shipped and are mostly driven by monopoly communities, where about 61% of increased purchasing power is offset by higher food prices. Thus, Northern communities are not pure “price‐takers,” and policies that increase cash assistance should consider the implications for local prices. Donnant‐donnant? Les prestations pour enfants et les prix dans le nord du Canada. Le coût de la vie est relativement élevé dans le nord du Canada, région isolée et peu peuplée servie par des oligopoles du commerce de détail (environ 34 % des collectivités sont en situation de monopole, et le reste en situation de duopole). Les transferts gouvernementaux constituent une large part du revenu des ménages dans les collectivités nordiques, et les prestations pour enfants sont particulièrement importantes, ces programmes ayant été étoffés ces dernières années (prestation universelle pour la garde d'enfants en 2015 et allocation canadienne pour enfants en 2016). Nous évaluons à quel point l'augmentation des prestations est neutralisée par les prix élevés. En utilisant la Banque de données administratives longitudinales et des données communautaires sur les prix et les expéditions de nourriture de Nutrition Nord Canada (2012 to 2019), nous constatons que la hausse des prestations pour enfants entraîne une augmentation des prix (avec une élasticité de 0,02), ce qui, pour une famille de quatre personnes, neutralise environ 24 % de l'augmentation du pouvoir d'achat résultant de l'amélioration des prestations. Nos résultats suggèrent que la hausse des prestations pour enfants accroît la demande alimentaire et que le principal mécanisme de transmission menant à des prix plus élevés réside dans l'augmentation des marges, puisque l'effet sur les prix reste conditionnel à la quantité de nourriture expédiée et est principalement stimulé par les collectivités en situation de monopole, où environ 61 % de l'augmentation du pouvoir d'achat est neutralisé par les prix élevés de la nourriture. Ainsi, les collectivités nordiques ne sont pas de simples «preneurs de prix », et les politiques qui augmentent l'aide en espèce doivent tenir compte des répercussions sur les prix locaux.

Suggested Citation

  • Nicholas Li & Angela Daley & Barry Watson, 2025. "Give and take? Child benefits and prices in Northern Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(3), pages 831-859, August.
  • Handle: RePEc:wly:canjec:v:58:y:2025:i:3:p:831-859
    DOI: 10.1111/caje.70021
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    References listed on IDEAS

    as
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