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Globalization, Politics and Provincial Government Spending in Canada

Published online by Cambridge University Press:  18 December 2006

Mark Pickup
Mark Pickup
Affiliation:
University of Oxford and University of Calgary
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Abstract

Abstract. Using time series, cross-sectional econometric modelling, an analysis is made of competing political and economic determinants of Canadian provincial government fiscal policy during the 1980s and 1990s. It is determined that provincial government spending responses to trade liberalization are dependent upon the ideology of the government and conditioned by the degree of provincial unionization. When relatively high levels of unionization prevail, those governments that typically spend the most reduce total spending to a lowest common denominator. However, when unionization is low, provincial government spending responses to increasing trade openness is primarily compensatory. This is in contradiction to the “race to the bottom” theory. The contingent nature of the provincial government spending response to trade openness means that despite overall pressures for fiscal convergence, political, economic and regional factors continue to contribute to distinct provincial spending policies.

Résumé. Cet article utilise une modélisation économétrique transversale en série chronologique pour analyser les déterminants politiques et économiques en compétition au niveau de la politique fiscale du gouvernement provincial canadien durant les années 1980 et 1990. Il est établi qu'en termes de dépenses publiques, les réactions du gouvernement provincial face à la libéralisation des échanges sont tributaires de l'idéologie du gouvernement et déterminées par le niveau de syndicalisation provincial. Lorsque le niveau de syndicalisation est relativement élevé, ce sont les gouvernements provinciaux qui dépensent le plus qui réduisent leurs dépenses totales au plus bas dénominateur commun. Par contre, plus le niveau de syndicalisation est bas, plus les dépenses publiques face à la libéralisation des échanges sont principalement compensatoires. Cela vient contredire la théorie du “ nivellement par le bas ”. La nature conditionnelle de la réaction du gouvernement provincial en termes de dépenses publiques signifie qu'en dépit des pressions globales pour la convergence fiscale, des facteurs politiques, économiques et régionaux continuent de contribuer aux politiques de dépenses publiques distinctes.

Type
Research Article
Information
Canadian Journal of Political Science/Revue canadienne de science politique , Volume 39 , Issue 4 , December 2006 , pp. 883 - 917
Copyright
© 2006 Cambridge University Press

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