The Impact of the CHST on Interprovincial Redistribution in Canada

Abstract

In 1996, transfers made under Established Programs Financing and the Canada Assistance Plan were replaced with the Canada Health and Social Transfer (CHST). This paper examines the impact of the CHST on the net redistribution of revenues across provinces in its first few years of operation. The results show that, while the CHST alters recent trends in net redistribution, the effects are modest when compared to the impacts of earlier measures such as the freeze in per capita EPF entitlements and the "cap on CAP", imposed in 1990. The federal government's recent decision to raise the CHST cash floor further reduces the CHST's effect on redistribution relative to the status quo as does the decision to adjust the allocation of the CHST slowly (rather than immediately) in the direction of equal per capita shares. Finally, the distinction between cash transfers and entitlements is important when measuring net redistribution from federal transfers to provinces.