COVID responses will impact Canada provincial politics

Significance Although the pandemic is beginning to recede in much of Canada, the federal and provincial governments are preparing for the onset of winter and its likely impact on case counts and public health measures. They must also assess the changes that COVID-19 has made to the economic, political and social landscape of the country. Impacts Social and economic disparities between those who are vaccinated and those who are not will become more pronounced. Washington’s delay in opening its borders to vaccinated Canadians will add to underlying bilateral tensions. Greater federal fiscal transfers to the provinces for healthcare next year will ease some of the federal-provincial tensions. Governments in Western Canada look vulnerable when facing the electorate amid criticism of their handling of the pandemic.

Fiscal Transfers in the Spatial Economy

Many countries shift substantial public resources across jurisdictions to mitigate spatial economic disparities. We use a general equilibrium model with multiple asymmetric regions, labor mobility, and costly trade to carve out the aggregate implications of fiscal transfers. Calibrating the model for Germany, we find that transfers indeed deliver smaller disparities across regions. This comes at the cost of lower national output, however, because economic activity is diverted away from core cities and toward remote areas with low productivity. But despite this loss in output per capita by about 2 percent in our baseline specification, welfare still increases by 0.07 percent because the transfer scheme countervails overcongestion in large cities. If the optimal transfer regime was implemented, welfare would increase by 0.06 percent. (JEL H77, J61, R12, R13, R23)

Assessing the effectiveness of regulation of inter-budgetary relations in the Russian Federation constituent entities in conditions of instability

Subject. This article considers the peculiarities of regulation of inter-budgetary relations in the constituent entities of the Russian Federation in the conditions of an unstable economic situation. Objectives. The article aims to form an approach to assessing the effectiveness of the distribution of transfers from regional budgets in current conditions. Methods. For the study, we used the methods of analysis and synthesis, analogy, comparison, and grouping. Results. The article offers recommendations for the formation and improvement of the approach to assessing the effectiveness of the distribution of intergovernmental fiscal transfers between municipalities. Conclusions and Relevance. The proposed approach to assessing the effectiveness of inter-budgetary relations in the region can help comprehensively assess the effectiveness of the provision and use of inter-budget transfers to municipalities. This makes it possible, if necessary, to promptly adjust the distribution of funds between municipalities in an unstable external environment. The proposed approach to assessing the effectiveness of the distribution of intergovernmental fiscal transfers between municipalities should be used in the activities of regional authorities in the development of relevant regulatory documentation, as well as in the practice of financial interaction between regional and local authorities.

The Impact of the Lockdown on the Greek Economy and the Role of the Recovery Fund

We develop a microfounded macroeconomic model that embeds the key features of the Greek economy. After calibrating the model to Greek data over 1995–2019, we assume that the economy is initially in the year 2019 and then quantify the adverse economic impact of the lockdown measures taken to control the spread of the pandemic, as well as the implications of the various policy measures (at national and EU level) taken to cushion the impact of the economic hit. We give quantitative answers to questions like: What will be the size and duration of the economic downturn? What are the implications of the national fiscal stimulus? What will be the role of the fiscal transfers coming from the European Recovery Fund? Our results imply that the national fiscal stimulus package adopted so far is helpful but, for the Greek economy to enter an era of sustainable growth, a mix of policies is also needed that combines: (i) a growth-enhancing fiscal mix (ii) product market deregulation (iii) a socially productive use of the resources coming from the Recovery Fund.