1,720,970 research outputs found
Fiscal Policy Trends: The Long-Term Consequences of Fiscal Responses to Resource Revenue Fluctuations
Full text linkOver the last half-century, the Alberta government has been heavily reliant on non-renewable resource revenues, which have averaged about 30 per cent of the provincial government’s total revenue. This reliance poses a fiscal challenge as resource revenues are volatile and uncertain due to the vagaries of global energy price shocks, pipeline disruptions and other events such as the federal government’s National Energy Program. This commentary shows that the Alberta government’s budgetary responses to fluctuations in resource revenues have had long-term deleterious consequences for the province’s fiscal health
Dynamic Scoring in the Ramsey Growth Model
No full textThis paper extends the Mankiw and Weinzierl (2006) model and examines the revenue effects of capital and labor income tax cuts under alternative financing regimes. Our analysis suggests that the revenue losses from capital and labor income tax cuts are the highest when the tax cuts are productive spending-financed and the lowest when transfer payments are used to finance the tax cuts. For plausible parameter values consistent with the US economy, we find that about 47 percent of a transfer-financed capital income tax cut is self-financing. The corresponding result for a productive spending-financed capital income tax cut is only 6 percent.
The stimulative effects of intergovernmental grants and the marginal cost of public funds
Full text linkWe test the hypothesis that the flypaper effect can arise if the recipient government finances part of its expenditures with a distortionary tax. We present a simple theoretical framework that shows how a lump-sum transfer stimulates the marginal expenditures of a recipient government through an income effect and a price effect. We test the predictions of this model using data on Canadian provincial expenditures and federal transfers to the provinces over the period 1981 to 2008. Our econometric results indicate that a 0.32
SIMULATING THE GROWTH EFFECTS OF THE CORPORATE INCOME TAX RATE CUTS IN ALBERTA
Full text linkShortly after its election in May 2019, the new Alberta government began fulfilling its promise to reduce the provincial corporate income tax (CIT) rate. The rate cut began in July 2019, when the government dropped the CIT rate from 12 to 11 per cent. The rate is scheduled to decline to 10 per cent on Jan. 1, 2020, followed by further one-percentage-point reductions in 2021 and 2022, bring the Alberta CIT rate down to eight per cent in 202
The Effect of Corporate Income Tax on the Economic Growth Rates of the Canadian Provinces
Full text linkThis paper investigates the long-run effects of the corporate income tax (CIT) rate on the economic growth of Canadian provinces using annual panel data for the period 1981-2016. We find evidence of a statistically significant negative long-term relationship between the provincial statutory CIT rate and economic growth. The model has the properties of a neo-classical growth model in that a reduction in the CIT rate “temporarily” increases the growth rate of the economy before returning to its long-run run growth rate. However, the temporary growth effects are economically significant and persistent. According to our preferred specification of the econometric model, one percentage point reduction in a provincial government’s statutory CIT rate increases the growth rate by 0.12 percentage points four years after the initial CIT rate cut and increases real per capita GDP by 1.2 percent in the long-run. We use the model to simulate the recently announced reduction in the CIT rate in Alberta from 12 percent in 2018 to 8 percent in 2022. The simulation results indicate that the growth rate of real per capita GDP would increase by 0.92 percentage points in 2022 and by 0.28 percentage points in 2029. The model also predicts that real per capita GDP would be 2.5 percent higher in 2022 and 6.5 percent higher in 2029. This would translate into employment increases of approximately 58,000 in 2022 and 172,000 by 2029. Our results indicate that provincial governments could significantly improve economic performance by lowering provincial corporate income tax rates
Alberta’s Fiscal Responses to Fluctuations in Non-Renewable-Resource Revenue
Full text linkWe investigate how successive Alberta governments have responded to shocks in non-renewable resource revenue over the period 1970 to 2017. Our results show that Alberta governments have increased spending by 63 cents in the fiscal year following a one dollar increase in real per capita non-renewable resource revenues. On the other hand, when non-renewable resource revenues have declined year over year, Alberta governments have not adjusted spending or other own source tax revenues. As a result of these asymmetric responses to fluctuations in resource revenues, the province’s stock of financial assets has declined and its net debt has increased by 46 billion dollars. The policy implication of our results is that provincial governments should put increases in non-renewable resource revenues in a fiscal stabilization fund or Alberta Heritage Saving Trust Fund rather than spending two-thirds of any short-term increase in revenues. This would result in a less volatile spending pattern and a sustainable fiscal policy with better services and lower tax rates
The Incentive Effects of Equalization Grants on Fiscal Policy
Full text linkThe equalization system has long been considered a vital underpinning of the Canadian federation: a means to create some purported fairness or justice among the provinces, by redistributing the wealth of provinces with larger fiscal capacities to allow those with weaker fiscal capacities to provide roughly equivalent services to their citizens. However, the mechanics of the equalization formula have long been suspected of being flawed. Since grant-receiving provinces can adjust the way their fiscal capacities are calculated and reflected in the equalization formula — by adjusting tax rates and spending, for instance — governments are confronted with incentives to design their fiscal regimes in ways that maximize the size of the grants they receive, even if the fiscal policies are designed for less-than-optimal economic efficiency. The incentive for grant-receiving governments to “game” the formula, even unconsciously, is apparent; what has remained largely unresolved is to what extent is it actually occurring. This analysis shows that indeed it is occurring, and to a measurable degree. It finds that equalization grants provide recipient provinces with incentive to raise their business and personal tax rates. This is because when a government raises its own tax rate, it raises the national standard average tax rate, which is used in the equalization allocation formula. That, in turn, raises the individual “have-not” province’s equalization-grant entitlement. Exacerbating the problem is that the tax-raising provincial governments tend to underestimate the deadweight cost that the tax hikes will have, potentially worsening the fiscal situation of a province that already faces difficult economic challenges. This analysis also finds that the equalization-grant allocation system encourages spending among recipient provinces, particularly on health-care services, resource conservation, industrial assistance, environment and housing. Results show that for every 0.64 in total expenditure. Neither effect necessarily furthers the equalization program’s idealistic intent. The promotion of higher tax rates especially would seem to work at odds with the program’s conceptualization of a federal redistribution model. By potentially further repelling business and taxpayers from “have-not” provinces, the result could be making those provinces increasingly needy while continually reducing their citizens’ wealth. The equalization formula is not unfixable. The arrangement can be made to work even better, in a way that maintains the principle of redistributing wealth from more privileged provinces to less privileged ones, while avoiding the perverse incentives that motivate “have-not” provinces to raise taxes. If equalization grants were substituted with block grants that are unrelated to taxing capacity, taxes in grant-receiving provinces may actually decline. A $100 per capita increase in block grants is potentially associated with an up to 2.6 percentage points drop in business tax and an up to 0.26 percentage point drop in personal income tax. The result would be an equalization arrangement that could help increase, rather than decrease, competitiveness in the very “have-not” provinces that most urgently need to attract investment. Switching to block grants would not only keep the integrity of the principles behind equalization in tact, it would actually make equalization work better for all provinces
The interplay of interest rates and debt-financed government spending
Full text linkProponents focus on the average fiscal cost of program spending when the interest rate on government debt is less than the economy's growth rate. They ignore the potentially large marginal fiscal cost of deficit-financed increases in spending that arise when a higher public debt increases interest rates on government debt and lowers growth rates
Going Beyond Counting First Authors in Author Co-citation Analysis
Full text linkThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
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