Can British Columbia’s Carbon Tax Success Happen Anywhere?

By Nikola Milutinovic, Queen’s University

Carbon taxes aren’t necessarily the job killer some provincial party leaders are making them out to be. Research by Ph.D. Candidate Akio Yamazaki of the University of Calgary should give Canadian politicians and pundits pause over the employment effects of carbon taxes. Yamazaki’s research suggests that British Columbia’s revenue-neutral carbon tax caused a net-gain in employment of 4.5% between 2007 and 2013. Governments can affect the labour market impact of carbon pricing by properly allocating their carbon tax revenues, according to Yamazaki.

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Queen’s Organizational Economics Conference

By Saad Khan, Queen’s University

On Thursday, June 14th, 2018, the Smith School of Business at Queen’s University hosted the Organizational Economics Conference. The conference covered a broad range of topics of particular interest to policy decisions related to the organization of businesses. The topics were as follows:  [1] growth prospects of franchises versus independent businesses, [2] the performance of serial entrepreneurs, [3] the effect of acquisitions designed to preempt competition on the continuation of the acquired project, [4] the effect of middle management treatment of employees on worker turnover and productivity, and [5] the optimal design of wage contract. This article summarizes the main findings of three papers presented at the conference and comments on policy implications.

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Smoking Bans Improve the Health of Children and Infants

By Fanny McKellips, Queen’s University

It is a well-accepted fact that smoking and second-hand smoke have harmful effects on health.

For this reason, many measures are taken by governments to decrease smoking and exposure to second-hand smoke. Canadian provinces, for instance, have banned smoking in all public places and workplaces. In the United States, 25 states have banned smoking in public places. While this limits exposure of non-smoking adults to secondhand smoke, it may create a displacement of smoking from public places to homes. Could this mean that children and infants, who cannot make their own decision to be exposed to second-hand smoke, are negatively affected by smoking bans? This issue is not well understood as the literature surrounding smoking bans tends to focus on the health impact on adults. Read More »

Closing the Income Sprinkling Loophole: Fair and Likely Efficient

By Frédéric Tremblay, Queen’s University

The Canadian government has recently announced that it intends to address what it considers to be three loopholes that allow tax planning using private corporations: income sprinkling, passive investments made by private corporations, and the conversion of a private corporations’ income into capital gains. This post will focus on the first form of tax planning, income sprinkling.

Income sprinkling refers to the use of the flexible structure of a Canadian-controlled private corporation (CCPC) to do income splitting with family members in lower tax brackets. This allows some Canadian small business owners to reduce their income tax burden in a way that is unavailable to other Canadians. Finance Canada estimates that closing the income sprinkling loophole would generate $250 million yearly in additional tax revenue[1]. Since the impact on federal finances is likely to be negligible, I focus my analysis on the issues of fairness and efficiency.

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Welcoming Brent Hickman

By Nora Ottenhof, Queen’s Universityhickman

Queen’s University Economics Department is thrilled to welcome assistant professor, and J. William and Marion E. MacKinnon Junior Fellow, Brent Hickman into the faculty. Brent joined the QED faculty last summer from the University of Chicago. We would like to take this opportunity to highlight some of Professor Hickman’s work and celebrate some of his career accomplishments so far.  

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Worker Mobility, Inequality, and Credit Scoring: Insights from the Macroeconomic Frontier

By Blair Long, Queen’s University

On Tuesday, May 11, the Queen’s Economics Department (QED) hosted the 12th Frontiers of Macroeconomics workshop (hereafter Frontiers). This conference brings together a diverse collection of contemporary research, exemplifying the frontier of modern macroeconomics. This article summarizes the objectives and findings of some of the conference’s presented work, and provides some commentary on the direction of both theory and methodology in macroeconomics.

What are the Determinants of Worker Job Matches?  

Ilse Lindenlaub’s “Multi-Dimensional Sorting of Workers and Jobs in the Data” (with Fabien Postel-Vinay) explores the mobility of workers and asks which worker skills are relevant in the sorting process. By sorting, economists mean how workers move from job to job, each time finding a “better” match, and ultimately finding one that is stable, in the sense that neither the worker nor the job (the firm) expects to prefer another working arrangement. The key methodological contribution is to develop a relatively simple test of how skills drive sorting behaviour, accounting for the considerable heterogeneity of skills. In doing so, the authors break from a standard simplification found in much economic theory: that worker ability (for instance) is one-dimensional. Of course, in the real world, we can group workers according to a near-infinity of skills, such as interpersonal, cognitive, non-cognitive, routine, manual, or creative. Read More »

Joint Conference on Financial Intermediation at Queen’s Economics Department

By Ken Chow, Queen’s University

On May 8th, 2018, the Queen’s Economics Department hosted the second annual workshop on Financial Intermediation and Regulation, jointly hosted by the Bank of Canada and the John Deutsch Institute. The conference brought together some of the world’s leading experts in finance and industrial organization to present and discuss their latest research. The conference covered interesting topics relating to finance and regulations including the impact of shadow banking on monetary policy [1], the strategic use of trade credit in retail supply chains [2], the dealers’ and investors’ bidding behaviour in Canadian treasury bills auctions [3], and how the current selection process of arbitrators in the US favours the repeat selection of industry-friendly arbitrators. [4]

A key feature of this conference is the emphasis put on the policy implications of academic research. In particular, the rise of the shadow banking sector in the last few decades have attracted the attention of academic researchers, central bankers and policymakers worldwide, making Kairong Xiao’s paper titled “Monetary Transmission through Shadow Banks” a very timely inclusion to the conference. To illustrate the importance of the shadow banking system, note that in the United States just prior to the onset of the great recession, the total shadow banking liabilities exceeded $20 trillion USD compare to $10 trillion USD liabilities in the traditional banking system. [5] Read More »

Buying Votes on Credit

By Peter Shannon, M.A. Economics, Queen’s University

Ontario’s 2018 budget was released March 28, projecting an unanticipated deficit of $6.7 billion for the 2018-19 fiscal year. The 2017 budget projected that Ontario was on track for consecutive balanced budgets and indeed, Ontario ended a 10 year string of deficits with a $642 million surplus in 2016-17. [1] Given the province’s rapid growth and low unemployment in recent years, tighter fiscal policy seemed imminent. However, pre-election promises of free childcare, expanded prescription drug coverage and increased health care spending will push Ontario back into red ink this year. [2]

The political motivations of Ontario’s 2018 budget are clear: with the June 7 election looming, Premier Wynne’s Liberals are attempting to replicate the success of their federal counterparts. Like Justin Trudeau in 2015, the Ontario Liberals are promising to run a series of deficits to expand social programs, with an emphasis on families with young children, seniors, and mental health. [2] Both governments display a shift in focus from net debt levels to debt-to-GDP ratios as a measure of sustainability.

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Indigenous Education – Transition Briefing

By Maggie JonesQueen’s University

Ontario is home to about a fifth of Canada’s Indigenous peoples aged 0-24, nearly 85% of whom live off reserve. In total, this means that Indigenous peoples make up about 3.4% of the off-reserve population aged 0-24 in Ontario. While the federal government has jurisdiction over the provision of education on reserves, it is the responsibility of the provincial governments to provide education to both Indigenous and non-Indigenous peoples living off reserve. The incoming government should seek to implement policies that reduce the gap in schooling outcomes between Indigenous and non-Indigenous peoples living off reserves.

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In Memory of Frank Lewis (1947-2018)

By Eliane Hamel Barker and Ardyn Nordstrom, Queen’s University

On March 14th, 2018, Frank Lewis passed away peacefully at home. Frank had been an Emeritus Professor for the Department of Economics at Queen’s University, where he spent 44 years of his career before retiring last year. He received his doctorate in Economics from Rochester University after graduating from Westmount High and McGill University.

Frank was devoted to teaching and mentoring students for many generations, and was an active researcher with a focus on Canadian economic history. His teaching legacy was recognized in 2016 when he received the Jonathan Hughes Prize for excellence in teaching from the Economic History Association. Even after retiring, Frank continued to contribute by publishing two academic papers and providing expert assistance to the Indigenous and Crown parties in a significant case involving 1850 treaties. The Queen’s Economics Department will always remember Frank Lewis for his years of contribution and for sharing his passion for economic history. You can read more about Frank’s illustrious career here.

A memorial service in Frank’s memory will be held on Thursday, May 3rd, 2018 in Grant Hall, Queen’s University. The ceremony will start at 2:30pm and will be followed by a reception at Ban Righ Hall in the Eliza S. Gordon Dining Room.

Frank’s full obituary is available here, where you will also find a space to pass along your condolences. Should you wish to donate to the Queen’s Economics Department in memory of Frank Lewis, you can do so here.