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Date of Award

1979

Degree Type

Thesis

Degree Name

Doctor of Philosophy (PhD)

Department

Economics / Economic Policy

Supervisor

J.A. Johnson

Abstract

This study develops a methodology to analyze the interregional impact of Federal grants to provincial governments. The approach is an application of lnput-Output analysis. The methodology is empirically implemented to illustrate the extent that employment income generated by Federal grants to a province spills over into other regions. These spillovers are recorded at an individual industry level and at the regional level. Four grant programs are investigated. These are equalization payments, and three conditional grants: health, social welfare, and education.

An interregional Input-Output model is developed for sixteen industries in five regions: the Atlantic provinces, Quebec, Ontario, Manitoba, and the United States. For each region, the government sector is specified by five final demand vectors which correspond to the three expenditure categories of the conditional grant programs, transportation communication and a general category which includes all other provincial government expenditures. This empirical model is based on three sources: the interregional Input-Output table of Canada developed by the Agricultural Economic Research Council, five provincial government expenditure functions estimated for each Canadian region in the model, and the regional government final demand vectors.

The results indicate that the gross employment income generated by federal grants is partially contained within the region receiving the grant. Ten dollar per capita increases in equalization payments to individual regions generate additional employment income in other regions which varies from $0.63 to $0.03 per capita. In all cases, these per capita spillovers are less than the per capita employment income generated in the recipient region. For all equalization payments, Ontario received the greatest per capita spillin followed by Quebec. The smallest per capita spillin accrues to either the Atlantic provinces or the United States. In general, this pattern of spillovers reflects the pattern of employment income generated in each industry of these regions as equalization payments are increased. However, exceptions are observed. For example, the spillover to the Quebec leather and textile industry which is generated by the equalization payment to Manitoba is larger than the local employment income effect in this industry.

A similar pattern of regional per capita spillovers is observed for conditional grants. In general, the largest per capita spillovers are generated by conditional health grants.

Overall, the methodology and results indicate how federal grant programs can accommodate interregional spillovers and their consequences for the regional and interindustry distribution of employment income.

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