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A growing literature shows that earnings differentials are explained in part by the fact that workers from different groups sort differently into high-paying and low-paying firms or are paid differently within the same firm. In this article, we explore whether any differences exist in how those two different channels contribute to earnings differentials between immigrants and native-born Canadians in the provinces of British Columbia, Ontario, and Quebec, which account for more than 80 percent of all immigrants in Canada. We find a surprising degree of similarity across the three provinces in the way in which firms contribute to the immigrant–native-born earnings gap. [ABSTRACT FROM AUTHOR]

The work of Boadway and Hayashi (2001) and Smart (2007) tends to confirm the hypothesis that provinces who are the beneficiaries of equalization payments adopt strategic behaviours that reduce their tax capacity and thus increase these payments. In this study, we analyze the impact that a new hydroelectricity royalty paid by Hydro-Quebec to the Quebec Treasury has on total equalization payments received by the province; to do this, we consider the equalization formulas used before 2004 and after 2007. This royalty, which generates approximately $600 million each year, reduces Quebec's equalization payments by just over $100 million, using either formula. Under the terms of the current equalization formula, Quebec loses 38 cents in equalization rights for each additional dollar of income received from natural resources. The new hydroelectricity royalty and the increase in the dividend rates applied to this government-owned corporation have made it possible for the Quebec government to benefit from a transfer of $1.15 billion; on the other hand it loses $437 million in equalization payments. In this study, we provide and describe an important counter example to the hypothesis concerning the strategic behaviour of provinces that benefit from an equalization scheme. [ABSTRACT FROM AUTHOR]