Publications

A fundamental governance challenge for federal nations is benefiting from decentralization, while addressing potential negative side-effects, including vertical and horizontal imbalances. Inefficient migration due to differential net-fiscal benefits in sub-national units is one potential negative side-effect. To avoid this type of migration, federal payments to disadvantaged sub-national units, a place-based policy, are often advocated. In this paper, we assess federal equalization transfer payments in Canada as an example of such a policy. Equalization is appraised in terms of its marginal influence on interprovincial migration, after accounting for the persistent relative attractiveness (unattractiveness) of provinces as migration destinations/origins. We then compare equalization to an alternative policy that directly subsidizes workers. Compared to a “people-based” policy of wage subsidies, our findings suggest that at the margin, these federal transfers have virtually no impact on net migration