Econ 710
Public Economics
Spring 2017
Prof. Kangoh Lee
1. Textbook: Intermediate Public Economics, 2nd ed., 2013, Hindriks and Myles.
In addition to the book, the course relies on research articles published in economic journals. Most
of the articles can be electronically downloaded from the SDSU library website. Important articles
are listed at the end of this syllabus, but the list may be adjusted if necessary.
2. Course Description: This course mainly studies public goods, externalities, public choice,
taxation, and income redistribution. The focus is on efficiency and equity of resource allocations
with and without government intervention, and on their implications for economic and social
policies.
3. Course Objectives/learning outcomes: This course is intended to help students understand the
effects of government intervention on efficiency and equity of resource allocations, and their
implications for government policies. Upon completion, students should be able to analyze and
evaluate government policies in terms of efficiency and equity.
4. Topics to cover: see the attached list of possible topics.
5. Office and Hours: Office, NH319, 619-594-8496, [email protected]
Office Hours: 10:00 a.m. – 11:30 a.m. and 1:30 p.m. -3:00 p.m. on M&W,
10:30 a.m. – 11:30 a.m. and 1:45 p.m. -2:45 p.m. on T&TH,
and by appointment
6. Blackboard: the course will use the university blackboard, and basic course information will be
placed on the blackboard. Students will need to register for a blackboard account.
A. Lecture Plans and Exam Information: Lecture plans and lecture outlines/slides will be posted
each week, which will give students an idea of what to cover and help them prepare for the class. I
will also post upcoming exam information.
B. Homework Questions: Homework questions will be posted.
7. Grade: The course grade depends on the exam scores (two hourly exams and the final exam),
homework questions, and research critique. The weight of each component is as follows: 1st
hourly exam (20%), 2nd hourly exam (20%), final exam (20%), homework questions (30%), and
research critique (10%). If the weighted average is 93.3 (90) or above, the course grade will be A
(A-). If 86.7 (83.3, 80) or above, B+ (B, B-). If 76.7 (73.3, 70) or above, C+ (C,C-). If 66.7 (63.3,
60) or above, D+ (D, D-). If 59 or below, F.
Cheating, Plagiarism, and other forms of academic dishonesty will not be tolerated, and will
be handled according to the university policies.
8. Exams: open book and open notebook
(1) The exam schedule is as follows;
First Hourly Exam: 12:30 – 1:45 p.m., February 23, 2017 (Thursday) in class
Second Hourly Exam: 12:30 -1:45 p.m., April 13, 2017 (Thursday) in class
Final Exam: 10:30 a.m. - 12:30 p.m., May 11, 2017 (Thursday)
(2) The final exam is comprehensive (cumulative) and covers all the topics and material discussed
throughout the semester.
(3) If one does not take a mid exam, and if one gives me a note stating the reasonable reasons, the
unused weight will be added to the final exam. This rule does not apply to the final exam, and one
must take the final exam to earn a credit.
9. Homework Questions: at the end of each chapter, homework questions will be assigned,
collected, and graded. Homework questions are an important part of the course requirements, and
students should treat homework questions as such.
(1) Homework questions should be completed individually by each student, and are not a group
project. A student should not see or copy another student’s homework solutions. If I decide that
one student sees or copies another’s answer, or if two or more students use a similar way of solving
homework questions, those students will get no credit, regardless of who borrows or copies. More
importantly, many exam questions will be based on homework questions, and it is important to
know how to solve homework questions.
(2) Late policy: 20% reduction of the grade if it is one-day late, and 40% reduction of the grade if it
is two-day late, and no grade after that. Exceptions can be made for documented reasons. This
policy is not negotiable under any circumstances.
10. Research Critique: each student is required to write a research critique on a public economics
research article that must be related to class discussion and published after 2015. I prefer you to
present your critique to the class, so that others can learn from your presentation. However, you
may choose to submit your critique to me rather than present it to the class.
I recommend you to choose an article from the journals listed below. The critique should be
scientific and based on sound economic reasoning and argument. The critique should be specific.
That is, when you criticize, you need to mention specific equation numbers or paragraph numbers
or page numbers. You need to demonstrate that you understand the weakness or deficiency of the
article in terms of economic analysis, and propose how to improve the article. The best way to
write a critique is to think of you as a referee, who should write a report to a journal editor.
(1)the list of journals: American Economic Review, Journal of Political Economy, Quarterly
Journal of Economics, Review of Economic Studies, American Economic Journal: Policy, Journal
of Public Economics, Economic Journal, International Economic Review, Review of Economics
and Statistics, International Tax and Public Finance, Journal of Public Economic Theory, National
Tax Journal, Journal of Urban Economics, Regional Science and Urban Economics, Journal of
Environmental Economics and Management, Environmental and Resource Economics,….
It is important to realize that you have to choose an article you can understand, because otherwise
you cannot criticize it. If you are not sure that your choice of article is a right one, you may discuss
your choice with me before you start writing.
(2) There is no restriction on the length of the critique, because your grade depends on the content
and rigor of the critique, not on the length of the critique.
(3) Each student should choose an article and write a critique independently. If two or more
students choose the same article, those students will get no credit.
(4) Deadline: if you choose to submit, submit your critique by the beginning of the May-4-2017
(Thursday) class. You may submit it anytime before the deadline, and this deadline is not
negotiable.
(5) Attach a photocopy of the article to your critique.
(6) List all the references correctly, so that I can verify them.
(7) Assignments should be students’ own work, and plagiarism and other forms of academic
dishonesty will be handled according to the university polices.
11. Attendance: Attendance is not required. However, all exams and homework questions will be
based on lectures to a considerable extent, and students are strongly advised to attend. In addition,
this course is not an online course, and the course will be taught based on the assumption that
students attend. As such, students should not expect to learn via email.
Tentative Topics to Cover
0. Orientation, and course requirements
1. Efficiency and equilibrium: Ch 2
(1) basic notion of efficiency and equilibrium: 2.6.2 – 2.6.4
2. Public goods: Ch 6
(1) Notion of public goods: 6.1, 6.2
(2) Efficient provision of public goods: 6.4
*Samuelson, “The pure theory of public expenditure,” Review of Economics and Statistics, 1954,
387-389.
(3) Private provision of public goods: 6.3
*Ribar and Wilhelm, “Altruistic and Joy-of-Giving Motivations in Charitable Behavior,” Journal of
Political Economy, 2002, 425-457
DellaVigna, List, Malmendir. “Testing for Altruism and Social Pressure in Charitable Giving,”
Quarterly Journal of Economics, 2012, 1-56.
Bergstrom, Blume, and Varian, “On the private provision of public goods,” Journal of Public
Economics, 1986, 25-49.
(4) Mechanisms for achieving efficiency: 6.7
3. Public Choice and Bureaucracy: Ch 5
(1) Bureaucracy basics: 5.4
*Alesina and Tabellini, “Bureaucrats or Politicians?: Part I: A Single Policy Task,” American
Economic Review, 2007, 169-179.
*Feld and Matsusaka, “Budget Referendum and Government Spending: Evidence from Swiss
Cantons,” Journal of Public Economics, 2003, 87, 2703-2724.
Niskanen, “The peculiar economics of bureaucracy,” American Economic Review papers and
proceedings, May 1968, 293-305.
Besley and Coate, “An Economic Model of Representative Democracy,” Quarterly Journal of
Economics, February 1997, 85--114.
4. Public Choice and Voting: Ch 6 and Ch 11
(1) Voting equilibrium basics: 6.5, 11.1-11.4.
Gerber and Lewis, “Beyond the Median: Voter Preferences, District Heterogeneity, and Political
Representation,” Journal of Political Economy, 2004, 1364-1383.
5. Club goods and local public goods: Ch 7
(1) basics: 7.1, 7.3.1
(2) Clubs and the economy: 7.4.1, 7.4.2
(3) Local public goods and the Tiebout hypothesis: 7.5, 7.6
*Tiebout, “A pure theory of local expenditure,” Journal of Political Economy, 1956, 416-424.
*Farnham and Sevak, “State fiscal institutions and empty-nest migration:Are Tiebout voters
hobbled?” Journal of Public Economics, 2006, 407-427.
*Figlio, Husted, and Kenny, “Political economy of the inequality in school spending,” Journal of
Urban Economics, 2004, 338-349.
6. Externalities: Ch 8
(1) basics: 8.1, 8.2
(2) efficiency and polices
(3) examples: 8.4.1, 8.4.5
* Ayres and Levitt, “Measuring positive externalities from unobservable victim precaution: An
empirical analysis of Lojack,” Quarterly Journal of Economics, 1998, 43-77.
Oreopoulos, “The long-run consequences of living in a poor neighborhood,” Quarterly Journal of
Economics, 2003, 1533-1575.
Chay and Greenstone, “Does Air Quality Matter? Evidence from the Housing Market,” Journal
of Political Economy, 2005, 376-424.
Ziven and Neidell, “The Impact of Pollution on Worker Productivity,” American Economic
Review, 2012, 3652-3673.
Fullerton and Metcalf, “Environmental controls, scarcity rents, and pre-existing distortions,”
Journal of Public Economics, 2001, 249-267.
Bovenberg and Mooij, “Environmental levies and distortionary taxation,” American Economic
Review, 1994, 1085-1089.
7. Rent seeking: Ch 12
(1) basics: 12.1, 12.2, 12.3.1, 12.3.2
(2) applications: 12.6.1
*Murphy, Shleifer, Vishny, “The allocation of talent: implications for growth,” Quarterly Journal of
Economics, 1991, 503-530.
*Sachs and Warner, “The Curse of Natural Resources,” European Economic Review,” 2001,
827-838.
*Brollo, Nannicini, Perotti and Tabellini. “The Political Resource Curse,” American Economic
Review, 2013, 1759-1796.
Krueger, “The Political Economy of the Rent-Seeking Society,” American Economic Review,
1974, 291-303
8. Income taxation: Ch 16
(1) basics: 16.5, 16.6
(2) optimal income taxation
*Saez, “Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply
Responses” Quarterly Journal of Economics, 2002, 1039-1073.
Diamond and Saez, “The Case for a Progressive Tax: From Basic Research to Policy
Recommendation,” Journal of Economic Perspectives, 2011, 165-190.
9. Tax Enforcement: Ch 17
(1) basics: 17.2-17.5
(2) Basic research articles
*Slemrod, “Cheating ourselves: The economics of tax evasion.” Journal of Economic Perspectives,
2007, 25-48.
*Andreoni, Erard, and Feinstein, “Tax Compliance,” Journal of Economic Literature, 1998, 818860.
*Allingham and Sandmo, “Income tax evasion: A theoretical analysis,” Journal of Public
Economics, 1972, 323-338. (download this paper from “Google Scholar”)
10. Asymmetric Information: Ch 10
(1) basics: 10.4, 10.5
Rothschild and Stiglitz, “Equilibrium in competitive insurance markets,” Quarterly Journal of
Economics, 1976, 629-649.
(2) signaling: 10.6
*Spence, “Job market signaling,” Quarterly Journal of Economics, 1973, 355-374.
(3) Moral Hazard: 10.7
Arnott and Stiglitz, “Basic analytics of moral hazard,” Scandinavian Journal of Economics, 1988,
383-413.
11. Commodity taxation: Ch 15
(1) basics: 15.5
(2) optimal commodity tax
Goulder and Williams, "The Substantial Bias from Ignoring General Equilibrium Effects in
Estimating Excess Burden, and a Practical Solution," Journal of Political Economy, 2003, 898927.
12. Behavioral Economics: Ch 3
(1) basics: 3.1, 3.2
*DellaVigna, “Psychology and Economics: Evidence of from the field,” Journal of Economic
Literature, 2009, 315-372.
Chetty, Looney, and Kroft “Salience and Taxation: Theory and Evidence” American Economic
Review, 2009, 1145-1177.
Elster, “Social norms and Economic Theory,” Journal of Economic Perspectives, 1989, 99-117.
Thaler, “Toward a Positive theory of Consumer Choice,” Journal of Economic Behavior and
Organization,” 1980, 39-60.
*We are likely to cover these articles.
**The above tentative topics may change: some topics may not be covered while other topics may
be added.