- To develop analytical tools and their application to key policy issues relating to the spending, taxation and financial activities of the government.
- To introduce students to the main models and analytical tools of Public Economics
- To develop student’s ability to apply theoretical knowledge to the actual economic cases
- Introduction to Public EconomicsIntroduction. Public Economics. Subject and methods. Government. Historical development. Measurements. Revenues and expenditures. Functions of the Public sector. The minimal state. Market failure. Redistribution.
- Market FailuresThe first and the second fundamental theorems of welfare economics. Pareto efficiency. Source of market failure: competition failure, incomplete markets, information failure, externalities, public goods. The theory of externalities. Coase theorem. Pigouvian taxation. The theory of public goods. Club goods and local public goods. Efficiency conditions for public goods. Mechanism design. Private provision of public goods. Second-best principle. Imperfect competition and government regulation. Welfare loss. Asymmetric information and government solutions.
- Income, inequality and povertyPareto efficiency versus alternative criteria. Equity and efficiency. Social welfare functions. Alternative theories of the role of the state. Redistribution and its effects. Inequality and poverty.
- VotingPublic mechanisms for allocating resources: problems of eliciting preferences and reconciling differing views. Voting. Majority voting: the median voter theory and the voting paradox. Arrow’s Impossibility Theorem.
- Rent-seekingSpecial interest groups. Rent-seeking behaviour. Controlling rent-seeking. Theory of bureaucracy. “Principal - agent” problem. Government failure.
- Commodity taxationTypes of taxes. The five desirable characteristics of a tax system. Tax incidence in competitive and monopolised markets. DWL and price elasticity. Equivalent taxes. Achieving tax neutrality. Effects of globalisation. Optimal commodity taxation: the Ramsey rule.
- Income taxationTaxes and labour supply: taxes and the individual budget constraint; income and substitution effects; non-linearities due to progressive taxation. Taxation of capital. Taxes and savings. Distributional considerations. Modelling tax evasion. Policies to reduce tax evasion.
- Theories of the public sectorThe size of public expenditures. Wagner’s law, Baumol’s law, a political model, budget-setting, etc. Public provision versus public procurement. Efficiency of public expenditures. Cost-benefit analysis.
- Social Insurance and Welfare ProgramsInformation problems and the market for insurance. The role of social insurance. The case of unemployment insurance. Health care. Retirement pensions: funded and "pay-as-you-go" state pensions. Efficiency: effects on savings and retirement decisions. Approaches to income support. Welfare programs, targeting and incentives .Means-testing. The contributory principle. Integrating taxes and benefits.
- Cost-Benefit AnalysisPrivate cost-benefit analysis. NPV and IRR methods. Social cost-benefit analysis. Measuring non-monetized costs and benefits. Shadow prices and market prices. Discount rate for social cost-benefit analysis. The evaluation of risk.
- Managing the Public Sector's Assets and LiabilitiesPrivatisation: efficiency and equity arguments about state intervention. Forms of intervention. Public versus private ownership. Competition and quasi-markets. Regulation. Managing public sector liabilities: issues in domestic and external debt management.
- Multiple JurisdictionsFiscal federalism. Arguments for multi-level government. The division of responsibilities. Principles of fiscal federalism: club theory and local public goods, Tiebout hypothesis. Production versus finance. The incidence applied to local public finance. Fiscal competition: problems of multi-jurisdictional taxation; income distribution; inter-governmental transfers.
- Midterm 1
- Midterm 2
- Final exam
- Group presentation 1
- Group presentation 2
- Essay 1
- Essay 2
- Class participation