Equalization Transfers in Canada: Emerging Challenges PRAKASH CHANDRA JHA Assistant Professor Department of Humanities and Social Science Vivekananda Global University Jaipur, India Introduction Canada has one of the most developed federal-provincial transfer systems in the world. Equalization transfer program is its major element. According to Joe Clark (Former Prime Minister of Canada), equalization along with pensions and medicare as programs, “confrmed that we are a society as well as geography” (as cited by Cowan, 2014). Formula through which equalization transfer is made is quite complex. Commenting on its complexity, Expert Panel on Equalization and Territorial Formula Financing (2006) stated: “…Equalization has been largely ignored by the vast majority of Canadians and it is understood by only a select few academics, experts, and fnance ofcials across the country.” Since the last one decade or so equalization transfer program remains a principal source of dispute between federal and provincial governments and among provinces. Although equalization transfer became key political issue, yet few scholars have paid systematic attention to the political dimensions of Canada’s federal equalization program (Lecours and Béland, 2012: 569). This is so because most of the scholars examined equalization transfers from the perspectives of the frst generation theory (FGT) of fscal federalism. Being mostly public fnance economists, they also confne themselves to economic aspects and analyses most of the problems of fscal federalism in near isolation from political dynamics of federalism. They assume governments (both federal and provincial) as benevolent and maximizer of public welfare functions. The second generation scholars of fscal federalism, on the other hand, contend that if given opportunity, government may involve in “rent-seeking activities”. The second generation theory (SGT) has emphasized on the incentives created by political process and institution. Second generation theorists have studied two diferent efects of inter-governmental transfers: incentive of federal government to make transfers of funds; and the incentives these funds create Vol. 47, No. 4 Asian Profle December, 2019