Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189293
Authors: 
Boadway, Robin
Hayashi, Masayoshi
Year of Publication: 
2002
Series/Report no.: 
Queen's Economics Department Working Paper No. 1006
Abstract: 
The Canadian system of equalization is designed to address differences in revenue-raising capacity across provinces, basing entitlements on actual provincial tax rates and bases. However, since it does so on a year-on-year basis, the standard against which a given province's equalization entitlements are calculated fluctuates from year to year as all provinces' tax bases and tax rates do. The consequence is that, while the redistribution function is fulfilled annually, the risk-sharing function suffers. The evidence we present indicates that at least for the business income tax, the equalization system can actually be destabilizing, thereby imposing on provinces variability in their potential revenue streams that exceeds what would exist in the absence of equalization.
Subjects: 
Intergovernmental Transfers
Equalization
Risksharing
Interregional Redistribution
JEL: 
H77
Document Type: 
Working Paper

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