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The Interregional Incidence of Public Budgets in Federations: Measurement Issues, Evidence from Canada, and Policy Relevance

Author

Listed:
  • Francois Vaillancourt

    (Departement de sciences ecomiques, Universite de Montreal)

  • Richard M. Bird

    () (Rotman School of Management, University of Toronto)

Abstract

In 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.

Suggested Citation

  • Francois Vaillancourt & Richard M. Bird, 2005. "The Interregional Incidence of Public Budgets in Federations: Measurement Issues, Evidence from Canada, and Policy Relevance," International Tax Program Papers 0510, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  • Handle: RePEc:ttp:itpwps:0510
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    File URL: http://www-2.rotman.utoronto.ca/iib/ITP0510.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Singh, Nirvikar & Rao, Govinda, 2006. "Political Economy of Federalism in India," OUP Catalogue, Oxford University Press, number 9780195686937.
    3. 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.
    4. 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.
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    Cited by:

    1. 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.

    More about this item

    Keywords

    regional fiscal flows; regional incidence; fiscal balance; Canada;

    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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