Author: Herb Grubel
In this third paper based on the public choice approach, Professor Herb Grubel of the Fraser Institute argues strongly against transfers to individuals and governments in lower income regions of the country. His view is based on the principle of moral hazard and his paper focuses mostly on potential negative incentives inherent in Canada’s Employment Insurance program. By analogy, he argues that governments are vulnerable to the same moral hazard and cites the Newfoundland government’s unwillingness to develop the Voisey’s Bay nickel deposit as evidence of the negative impacts of equalization. To deal with these perceived deficiencies in transfer programs Grubel calls for experience rating for employment insurance and a gradual phasing out of equalization.