Tackling Provincial Revenue Volatility

Abstract

What is the best approach for coping with provincial revenue shocks and provincial revenue volatility? Canada’s current approach involves a combination of both national-level insurance, in the form of the federal government’s Fiscal Stabilization Program (FSP), and self-insurance options should a province choose to implement any. What reforms, if any, could improve upon the status quo? This short paper seeks to contribute to this discussion by addressing three questions. What is the extent of revenue volatility in the provinces and how has it changed over time? What is the current level of national risk sharing? What are the key obstacles to improving upon Canada’s current approach to dealing with provincial revenue shocks?