Fiscal Fragmentation in Decentralized Countries

Fiscal Fragmentation in Decentralized Countries

Subsidiarity, Solidarity and Asymmetry

Edited by Richard M. Bird and Robert D. Ebel

Most countries, developed and developing, are fiscally decentralized with regional and local governments of varying importance. In many of these countries, some of these sub-national governments differ substantially from others in terms of wealth, ethnic, religious, or linguistic composition. This book considers how fiscal arrangements may strengthen or weaken national solidarity and the effectiveness with which public services are provided. In particular, the nation’s ability to cope with changes created by decentralization is explored.

Chapter 3: Reconciling Diversity with Equality: The Role of Intergovernmental Fiscal Arrangements in Maintaining an Effective State in Canada

Richard M. Bird and François Vaillancourt

Subjects: economics and finance, political economy, public sector economics, politics and public policy, political economy


Richard M. Bird and François Vaillancourt* Many countries contain diverse regions within their boundaries, and regional diversity may influence the nature and effectiveness of public sector activities through many economic and political channels. Few industrial countries offer clearer examples of this phenomenon than Canada. The most important and prominent manifestation of diversity in Canada has been the rise to dominance of a political party advocating secession in the largely francophone province of Quebec, but regional differences and tensions are by no means confined to Quebec. In particular, the rise of the western provinces, particularly Alberta and British Columbia, as separate and important players on Canada’s political and economic scene was almost as marked a feature of the last third of the 20th century as the consequences of Quebec’s so-called Quiet Revolution since the 1960s. More recently, since about 1990, the key central province of Ontario has also begun to act to some extent differently from Canada as a whole in a way that it has never done before (see Courchene and Telmer 1998 for a detailed discussion). Thus the last half of the 20th century was a turbulent period in Canadian politics. The first part of the 21st century seems unlikely to be calmer, as the continental integration of the Canadian and US economies continues to re-orient Canadians in a north–south rather than east–west direction. One way that the federal government has attempted to accommodate the rise of Quebec’s, and to a much lesser extent western, unrest...

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