PhD in Public Policy and Administration Università Bocconi Academic Year 2016‐17 Public Economics and Finance Professor Paola Profeta Course Description This course provides a general introduction to the theory and practice of public economics and finance. The course combines theoretical models with empirical evidence. The instructor will present the main questions addressed and selected tools used in public economics. These tools are then applied to the spheres of public revenues (taxation) and public expenditure. Students will receive readings and they are required to prepare a presentation in class. The course is organized in 12 sessions (1,5 hour each). Detailed Description of Assessment Methods 60% final written exam; 40% presentation and discussion in class The presentation should last around 30 minutes. There is a general discussion at the end of each presentation. All students are required to read the papers before the presentation (not only the speaker), and to be active during the presentation and the discussion. Contact E‐mail: [email protected] Office: 3 b1‐03, Via Roentgen 1 Office hour: By appointment Course outline Lesson 1: 13/2, 8.45 Introduction and background This session introduces the study of public economics and its importance for our understanding of how government intervenes in the economy, what are the consequences, what are the desired outcomes and how they affect individuals and the society at large. We also discuss the international scenario on taxes and expenditures and present data. Material: Teacher’s note Lesson 2: 15/2, 8.45 The Public finance approach This session presents the main questions of the public economic approach, it explains the equity/efficiency trade‐off and the two welfare theorems. Failures of the market are also discussed. Material: Teacher’s notes Lesson 3 and 4: 20/2, 8.45 AND 10.30 The Public choice and political economy approach The public choice approach goes beyond the economic one. We present the main features of this approach, and discuss specific cases. We introduce the basic methodology from Arrow’s impossibility theorem to the median voter theorem and its applications to the analysis of redistributive policies. We also introduce probabilistic voting games. Material: Teacher’s notes Lesson 5: 22/2, 8.45 Taxation We introduce the basic concepts of taxation in public economics, including progressivity. We then analyze the effects of taxes on labour supply. We then move to the main policy challenges in the area of taxation. Material: Teacher’s notes European Commission. Tax Reforms in EU Member States 2015: Tax policy challenges for economic growth and fiscal sustainability. http://ec.europa.eu/economy_finance/publications/eeip/pdf/ip008_en.pdf Lesson 6 and 7: 27/2, 8.45 and 10.30 Taxation: Readings Students are required to read and prepare a presentation of the following papers focused on major challenges of tax reforms. Readings: 1) Arnold, Jens Matthias and Brys, Bert and Heady, Christopher and Johansson, Åsa and Schwellnus, Cyrille and Vartia, Laura (2011), “Tax Policy for Economic Recovery and Growth”, The Economic Journal 121, 550: 59‐80 2) Castanheira, M., Nicodème, G. and Profeta, P. “On the Political economics of tax reforms: survey and empirical assessment” (2012), International Tax and Public Finance 19(4): 598‐
624. 3) James Mirrlees, Stuart Adam, Timothy Besley, Richard Blundell, Stephen Bond, Robert Chote, Malcolm Gammie, Paul Johnson, Gareth Myles and James Poterba. The Mirrlees Review: Conclusions and Recommendations for Reform. Fiscal Studies 32 (3): 331‐359. 4) Luttmer, Erzo F. P. and Monica Singhal. 2014. "Tax Morale." Journal of Economic Perspectives, 28(4): 149‐68. Lesson 8: 1/3, 8.45 Social Security We discuss the main features of pension systems, sum up the main theories that explain them and then focus on pension reforms. Material: teacher’s notes OECD, Pension at a glance, Chapter 1 http://www.oecdilibrary.org/docserver/download/8115201e.pdf?expires=1455037423&id=id&acc
name=guest&checksum=F291E470A5C1F07D2BBE923056AF3144 Lesson 9: 6/3, 8.45 The origins of welfare state and pension systems The teacher presents a recent paper on the topic. Material: teacher’s notes Galasso, V. and Profeta, P. When the state mirrors the family: the design of pension systems Lesson 10: 6/3, 10.30 Social Security: Readings Students are required to read and prepare a presentation of the following readings, which focus on major challenges of social security programs. Readings: 5) Courtney Coile, Kevin S. Milligan, David A. Wise (2016) “Social Security and Retirement Programs Around the World: The Capacity to Work at Older Ages ‐ Introduction and Summary” NBER Working Paper No. 21939 6) Disney, R. (2007) “Population ageing and the size of the welfare state: Is there a puzzle to explain?” European Journal of Political Economy 23: 542‐553. AND V.Galasso and P. Profeta “Population Ageing and the Size of the Welfare State” in “International Handbook of Ageing and Public Policy” (2014), Edward Elgar. 7) Galasso, V., Gatti, R. and Profeta, P. (2009) “Investing for the old age: Pensions, children and savings”, International tax and Public Finance 16(4): 538‐559. Lesson 11: 10/3, 8.45 Examples of government intervention in specific areas/1 ‐ Education, inequality and social policies After a brief introduction, students are required to read and prepare a presentation of the following readings. Reading 8) Levy, Santiago and Norbert Schady (2013). "Latin America's Social Policy Challenge: Education, Social Insurance, Redistribution." Journal of Economic Perspectives, 27(2): 193‐
218. 9) Autor, D. “Skills, education and the rise of earnings inequality among the other 99 per cent” (2014) Science 344 6186: 843‐851 Lesson 12: 15/3, 8.45 Examples of government intervention in specific areas/2 ‐ Gender and public policies The teacher will present an overview of government intervention to support female occupation and female leadership. We then turn to the role of gender in decision‐making and public finance outcomes. Students are required to present two recent research papers related to gender and public policies. Readings: 10) Funk, P. and Gathmann, C. (2015) Gender Gaps in Policy Making: Evidence from Direct Democracy, Economic Policy 30(81): 141‐181. 11) Ferreira, F., and Gyourko, J. (2014). Does Gender Matter for Political Leadership? The case of U.S. mayors, Journal of Public Economics, 112, 24‐39. Exam: 27 March, 9am, Room 41