Une introduction aux subventions intergouvernementales

Notre article vise principalement à donner des notions élémentaires sur les fondements de la théorie des subventions intergouvernementales, qui pourront être utiles aux nouveaux venus dans ce domaine actif de la recherche. En outre, nous donnons un aperçu sélectif des récents articles théoriques sur les subventions, en soulignant particulièrement les jeux non coopératifs entre divers niveaux de gouvernement dans un système fédéral. Les parties de notre article correspondent à des sujets généraux : les subventions de péréquation, les subventions liées au partage des recettes et les subventions conditionnelles. Pour rehausser la valeur pédagogique de cet article, nous fournissons pour chaque sujet une étude mathématique simple et unifiée (dans la mesure du possible) qui accompagnera une description discursive des points principaux relevés dans la documentation.The principal aim of our paper is to provide a primer on the foundations of the theory of intergovernmental grants, suitable for newcomers to this active field of research. In addition, we provide a selective survey of recent theoretical papers on grants, focusing particularly on non-cooperative games between different levels of government in a federal system. The sections of the paper correspond to broad topics: equalization grants, revenue-sharing grants, and conditional grants. To enhance the paper's pedagogical value, we provide a simple and (as much as possible) unifïed mathematical treatment of each topic to accompany a discursive description of the main insights found in the literature

Une introduction aux subventions intergouvernementales

The principal aim of our paper is to provide a primer on the foundations of the theory of intergovernmental grants, suitable for newcomers to this active field of research. In addition, we provide a selective survey of recent theoretical papers on grants, focusing particularly on non-cooperative games between different levels of government in a federal system. The sections of the paper correspond to broad topics: equalization grants, revenue-sharing grants, and conditional grants. To enhance the paper's pedagogical value, we provide a simple and (as much as possible) unifïed mathematical treatment of each topic to accompany a discursive description of the main insights found in the literature. Notre article vise principalement à donner des notions élémentaires sur les fondements de la théorie des subventions intergouvernementales, qui pourront être utiles aux nouveaux venus dans ce domaine actif de la recherche. En outre, nous donnons un aperçu sélectif des récents articles théoriques sur les subventions, en soulignant particulièrement les jeux non coopératifs entre divers niveaux de gouvernement dans un système fédéral. Les parties de notre article correspondent à des sujets généraux : les subventions de péréquation, les subventions liées au partage des recettes et les subventions conditionnelles. Pour rehausser la valeur pédagogique de cet article, nous fournissons pour chaque sujet une étude mathématique simple et unifiée (dans la mesure du possible) qui accompagnera une description discursive des points principaux relevés dans la documentation.

Policy Forum: Carbon Taxes and Fiscal Federalism in Canada—A New Wrinkle to an Old Problem

The federal government intends to increase its minimum carbon tax from $40 per tonne of carbon emissions to$170 per tonne by 2030. The carbon tax increase will have uneven and potentially large impacts on provincial emissions and carbon tax revenue, but little is known about how decisions to recycle these revenues will affect equalization payments to provinces. This article compares baseline equalization payments with simulated payments under various revenue-recycling scenarios given a $170 minimum carbon tax. The simulations demonstrate that recycling carbon tax revenues with offsetting reductions in provincial personal or business income taxes, for example, lowers overall disparities in provincial governments' revenue-raising abilities and reduces the size of the equalization program needed to address these disparities. The article draws attention to an already controversial design feature of the program, the fixed-growth rule. The simulations show that the fixed-growth rule limits the impact of higher carbon tax revenues on equalization, by adjusting payments to ensure that the overall size of the program grows roughly in line with the economy. As a result, any potential savings in aggregate equalization payments from revenue recycling are not realized. The distribution of payments is also affected by the fixed-growth rule. Overequalization often results, with Quebec and sometimes Ontario as the main beneficiaries.</jats:p

The Impact of the CHST on Interprovincial Redistribution in Canada

In 1996, transfers made under Established Programs Financing and the Canada Assistance Plan were replaced with the Canada Health and Social Transfer (CHST). This paper examines the impact of the CHST on the net redistribution of revenues across provinces in its first few years of operation. The results show that, while the CHST alters recent trends in net redistribution, the effects are modest when compared to the impacts of earlier measures such as the freeze in per capita EPF entitlements and the "cap on CAP", imposed in 1990. The federal government's recent decision to raise the CHST cash floor further reduces the CHST's effect on redistribution relative to the status quo as does the decision to adjust the allocation of the CHST slowly (rather than immediately) in the direction of equal per capita shares. Finally, the distinction between cash transfers and entitlements is important when measuring net redistribution from federal transfers to provinces.

Analysis of Carbon Tax Treatment in Canada’s Equalization Program

Carbon taxes are not only an efficient tool to mitigate greenhouse gas emissions, but they are also an increasingly important source of government revenue. The uneven distribution of emissions, however, creates significant differences across provinces in terms of their revenue potential. Equalization payments can mitigate these differences, but little is known about how this program interacts with carbon taxes. In this article, we quantitatively analyze this interaction and explore alternative considerations for equalization design—such as which revenues to include or tax bases to use—that may motivate changes to improve the functioning and effectiveness of both equalization and climate policy.</jats:p

Grants structure in an intergovernmental fiscal game

Key words: Intergovernmental grants, grants-in-aid, fiscal federalism, JEL classification: H7,

Strategic Interactions and Uncertainty in Decisions to Curb Greenhouse Gas Emissions

This paper examines the strategic interactions of two large regions making choices about greenhouse gas emissions in the face of rising global temperatures. Three central features are highlighted: uncertainty, the incentive for free riding, and asymmetric characteristics of decision makers. Optimal decisions are modelled in a fully dynamic, feedback Stackelberg pollution game. Global average temperature is modelled as a mean reverting stochastic process. A numerical solution of a coupled system of Hamilton-Jacobi-Bellman equations is implemented and the probability distribution of outcomes is illustrated with Monte Carlo simulation. When players are identical, the outcome of the game is much worse than the social planner’s outcome. An increase in temperature volatility reduces player utility, making cooperative action through a social planner more urgent. Asymmetric damages or asymmetric preferences for emissions reductions are shown to have important effffects on the strategic interactions of players.</jats:p