Are equalization payments making Canadians better off? A two-dimensional dominance answer
Résumé
This article provides a robust normative appraisal of the Canadian equalization transfers system. The two-dimensional dominance criteria introduced by Atkinson and Bourguignon (RES, 1982) are used to compare the distributions of private and public goods before and after equalization payments. Because the distribution before equalization is not observable, it is simulated on the basis of various scenarios that specify both its financing by the federal government and its utilization by provincial governments. The main result of the paper is that, for most scenarios, equalization transfers have an ambiguous normative impact on the distribution of well-being among Canadians and that, for some scenarios, equalization transfers actually worsen this distribution of well-being.