Table of Contents

The Political Economy of Inter-Regional Fiscal Flows

The Political Economy of Inter-Regional Fiscal Flows

Measurement, Determinants and Effects on Country Stability

Studies in Fiscal Federalism and State–local Finance series

Edited by Núria Bosch, Marta Espasa and Albert Solé Ollé

Struggles over what a region receives, or should receive, from the budget of the central government are common to many countries. Discussions often focus on the measures of ‘net fiscal flows’ or ‘fiscal balances’ provided by the government or other actors. This unique book shows just how these flows are computed then interpreted and clarifies the often misunderstood economic and political motives that explain why some regions receive more monies than others.

Chapter 15: The Costs and Benefits of Constitutional Options for Québec and Canada

François Vaillancourt

Subjects: economics and finance, public finance, politics and public policy, public policy


François Vaillancourt 1 INTRODUCTION The purpose of this chapter is to present the origin and evolution of the Québec independence movement, to describe the ties that bind the various parts of Canada (trade, labor, fiscal and debt) and how they have been discussed in the debates on independence and to examine various constitutional options and their costs and benefits for Québec and Canada. The chapter is thus divided in three main parts. This is related to the main theme of this book, fiscal flows, in two ways. First, the benefits described here are in part the direct results of various items that determine the fiscal flows to Québec. Second, the existence of these positive flows should, given the relative poverty of Québec inside Canada and according to the model put forward by Spolaore (this volume), decrease the secession threat from Québec. There is no robust empirical evidence on this point; it would need to be obtained from a time series multivariate analysis of the support for sovereignty and the data series are not sufficiently long to do this. We would argue that fiscal flows have increased over time since 1965, along with the support for sovereignty. But this does not show that they do not make this support smaller than it would have been otherwise. We also note that politicians of the sovereignty camp have long argued that, even if Québec objectively receives positive fiscal flows (something they do not concede easily), that...

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