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Should the Canadian Federation be Rebalanced?

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Abstract

Recent changes in the federal-provincial transfer system have left the Canadian federation in a state of vertical fiscal imbalance. Given the tax room occupied by the federal government and the provinces, the magnitude of transfers is insufficient to sustain the relative levels of expenditure responsibilities into the future. Sooner or later some choice must be made between ceding further tax room to the provinces and increasing transfers. In this paper, we outline the cases for each of these two courses of action, and argue that federal tax room should be jealously guarded and the imbalance addressed by increasing transfers to the provinces. The argument is based on tax harmonization considerations and on the importance of federal transfers as a means of accomplishing national efficiency and equity objectives.

Suggested Citation

  • Robin Boadway, 2004. "Should the Canadian Federation be Rebalanced?," University of Western Ontario, Economic Policy Research Institute Working Papers 20041, University of Western Ontario, Economic Policy Research Institute.
  • Handle: RePEc:uwo:epuwoc:20041
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    File URL: http://economics.uwo.ca/epri/workingpapers_docs/wp2004/Boadway01.pdf
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    Cited by:

    1. Sharma, Chanchal Kumar, 2010. "Beyond Gaps and Imbalances: Re-Structuring the Debate on Intergovernmental Fiscal Relations," MPRA Paper 32145, University Library of Munich, Germany.
    2. Antonio Zabalza, 2008. "Dynamic Horizontal and Vertical Equity in Intergovernmental Transfers," Working Papers 0801, International Economics Institute, University of Valencia.

    More about this item

    Keywords

    federal-provincial transfers; fiscal imbalance; fiscal gap;

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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