FISCAL FEDERALISM AND INFRASTRUCTURE: How has Federal and Provincial Infrastructure Spending Changed in Canada?

Abstract

Since 2009, Canada’s federal government has twice embarked on a policy of increasing federal infrastructure spending with the aim of achieving economic, social, or environmental outcomes. But the federal government is not the only player providing funding for infrastructure. In fact, in Canada, public funding for infrastructure is principally delivered by municipal and provincial governments. In recognition of this, it is a requirement of the flagship federal Investing in Canada Infrastructure Program that provinces must not use incremental funding provided by the federal government to displace funding provinces would otherwise have spent on infrastructure, although it remains unclear whether this requirement is being met. This research paper approaches the question of displacement through the theoretical framework of fiscal federalism to rationalize the federal role in providing funding for public infrastructure. Moreover, the research employs quantitative methods to assess trends in federal and provincial infrastructure spending from 2009-2019. Ultimately, there is some evidence to suggest that certain provinces have increased infrastructure spending in concert with the federal government, and there is no strong evidence to suggest that the provinces are deliberately substituting their infrastructure spending for federal funds.