Working Papers Series
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A Measure of Interregional Redistribution
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This paper develops a disaggregated index of interregional distribution generated by federal fiscal activity based on a comparison between relative federal revenues and expenditures assigned to various regions and the pattern of income disparities among regions. To explore the properties of this index, we present three special cases under known degrees of distribution and calculate the indices using the Canadian data for 1996. The local indices are then aggregated to derive a global index qf interregional redistribution. Our results show that the federal fiscal system in 1996 delivered a degree of interregional redistribution 1.8 times what would have been generated under equal per capital expenditures by region and nearly half of the redistribution that equalizes the per capita income via federal expenditures.
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A National Formulary for Canada
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This article analyzes the benefits and costs of replacing Canada's ten different provincial formularies with one single national formulary. The 2002 Romanow Commission on the Future of Health Care in Canada recommended that Canada should have a National Drug Agency which would maintain a national formulary, replacing the existing provincial formularies which balkanize drug markets across Canada. This recommendation has been in part incorporated into the "Common Drug Review" in which the provinces (excluding Québec) have agreed to undertake a single evaluation of all new drugs; provinces, however, retain their own formularies and decide which products to list. This balkanized approach to listing and insurance coverage of drugs substantially weakens the bargaining position of the provinces and leads to higher costs.
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A Note on the Probability of Recessions: Can Statistics Canada's Leading Index Predict as Well as MARS
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In this note we estimate the probability of recession using the revised leading index published by Statistics Canada. The results are compared to probabilities derived from a new non-parametric regression routine. While the indexes provide similar information on the probability that the economy is currently in recession, the non-parametric approach appears to offer more reliable information. Two out-of-sample forecasting exercises demonstrate the potential benefits to the use of the multivariate adaptive regression spline model.
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Are Real Exchange Rates Stationary? More Evidence from Panel Unit Root Tests
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A number of recent studies using the panel unit root test of Levin and Lin (1992) suggest that real exchange rates are mean-reverting. These findings are at odds with traditional univariate unit root/stationarity test results. The purpose of this note is to extend the analysis to indexes of real effective exchange rates, and to demonstrate the sensitivity of the results to the lag lengths adopted in the panel testing procedure and the variables included in the panel. The empirical findings suggest the evidence in favour of a Cassellian view of purchasing power parity is less conclusive than it may appear.
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Canadian Newsprint in the United States: A Multivariate Cointegration Analysis
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In this paper, Johansen multivariate cointegration tests are adopted to investigate the U.S. demand for Canadian newsprint using monthly data from May 1988 to December 1996 Preliminary data analysis shows that all data are non-stationary which implies that previous results based on simple ordinary least squares are spurious. Johansen multivariate cointegration techniques allow for identifying a long-run relationship as well as a short-run relationship via an error correction model. Among the determinants are the export price of Canadian newsprint to the US., the exchange rate between the two countries, US. personal disposable income, and US. newsprint price.
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Capital Income Taxation, Labour Supply and Work Effort
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Although it is well-known that, in life cycle models of consumption and labour supply, capital income taxation affects the labour supply through the normal income effect, this interaction between capital income taxation and labour market behaviour is usually confined to the voluntary savings of consumers who wish to smooth the pattern of consumption through their lifetime. We show in this paper that the interaction maybe widespread. Three channels through which capital income taxation may affect labour market behaviour are identified: first, capital income taxes may alter the lifetime labour supply when workers are constrained on hours of work; second, they may affect labour supply in the case where consumers target a certain level of lifetime consumption; finally, they may influence work effort in an efficiency wage model.
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Climate Change Plans for Canada: a Full Cost-Benefit Framework for Evaluating Options at the Provincial Level
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This paper examines the provincial economic impacts from implementing the Kyoto Protocol in Canada under two policy options currently being considered by the federal government: the Broad-as-Practical and Reference-Package options. Using information from federal documents and academic literature, we find that the federal forecasts of undiscounted GDP losses to provincial economies represent misleading indicators of true economic impacts. We suggest that a more accurate provincial impact analysis of GHG policy options would be based on a net present value framework that incorporates discounted costs and ancillary benefits over the time-frame of the program. Once these elements are accounted for, we find that most provinces would benefit under both policy options, and would prefer the Reference-Package. Specifically, the Reference-Package option reduces provincial burdens of achieving Canada's Kyoto commitment, and may do so at virtually no net efficiency cost relative to the Broad-as-Practical option. These findings emphasize the importance of incorporating both market and non-market values into the policy-making arena.
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Convergence in a Small Open Economy
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This paper used data for the ten Canadian provinces to determine whether there was convergence of regional disparities during the 1961-99 period. The results show mixed evidence on convergence. There was convergence of nominal output, but no convergence of real output, per capita or per worker. During the 1984-99 period, there was no convergence of output, per capita or per worker, in nominal and in real terms. However, there was convergence of personal income per capita over the entire period and for the two sub-periods. Government transfers to persons increased the speed of convergence of personal income per capita.
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Did the 1994/96 Employment Insurance Reforms Improve Labour Market Outcomes for Young People
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One of the goals of the Employment Insurance (El) changes during 1994/96 was to reduce the number of habitual, seasonal El users, and to re-channel such users into higher skilled, lower-unemployment occupations. The changes were expected to re-direct a large proportion of young people into more productive human capital acquisition and occupational-choice activity.
This paper investigates, using a simple one-equation model, the factors associated with a polychotomous (multinomial) variable describing labour-market states for young people. The model uses year / province interaction variables to explain pre- and post-reform El policy changes, along with labour-market and socioeconomic control variables.
This paper finds that labour market/human capital participation for young people improved steadily, from the 1980s through the late 1990s, for young people living as dependants within a family. But for young people living away from their parents, there was little long-run economic improvement. For this group, there is some evidence that the 1994/96 El reforms did play a small role in improving labour market / education outcomes.
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