Econ 441: Analytical Public Finance
Econ 441: Analytical Public Finance
THE UNIVERSITY OF WISCONSIN-MADISON
Department of Economics
Spring 2003
Professor James Andreoni andreoni@wisc.edu
Teaching Assistant: Joseph Guse ajguse@students.wisc.edu
Class webpage: http://www.ssc.wisc.edu/~andreoni/Econ441/
See also Joseph's TA page, with homework
solutions:
http://www.sit.wisc.edu/~ajguse/441/
Note:
Final exam is
May 12, 2003
10:05 am, room 3425 Sterling
New (Mar 27) Lecture Notes by Dan Meyer on W-2 and Welfare Reform
New (Feb 20) Homework 2 Due February 27th in class
New (Feb 17) Driving in London Is Pound Foolish New York Times article on new congestion taxes in London, England.
New (Feb 13) Homework 1 Due February 20th in class
NEW! (Feb 5): Collection of Possible Starting Points for your Research Paper. Follow this link to see a list of papers that you might use to begin your research project. This list is meant to inspire you--you don't need to pick a topic from the list. Also, it is not essential that you understand all of the technical aspects of these papers, but that you can understand the arguments and the findings presented in them.
NEW! (Feb 8): Results of the Public Goods Investment Game in Class
E. INTERESTING LINKS FOR PUBLIC FINANCE
Public Finance is the branch of economics that studies the role of the public sector in the economy. In this course we will study the intellectual foundations that justify the existence of the public sector, and the economic theory that describes what the role of the public sector should be. We will then look at what the U.S. public sector actually does, and how it meets or fails to meet its goals.
Prerequisites:
Intermediate Microeconomics 301 (or 311) is an essential prerequisite for this course. The course will assume a competency at roughly the level of intermediate books like Varian, or Frank. It will be a good idea to keep your intermediate microeconomics textbook close at hand while studying for this course.
Texts:
The main text is: Rosen, Harvey S., Public Finance, Sixth Edition, Irwin 2002.
There will also be required reading from academic journals. Many of these are available for download below (marked PDF or Article). A great deal of material that is not in the text will be presented in the lecture.
Exams, Papers and Grades:
The course will require two midterm exams and a short paper. The midterms will be given on March 11, in class, and May 12 during the summary period. The midterms will count 40% of your grade each, and the paper will count 20%. There will also be occasional homeworks, which will be read but not factored into your grade directly.
For the paper you must choose a proposed or legislated government policy to write about. The paper must describe the policy and provide an economic analysis of it. This could include a description of how the policy may affect economic behavior, such as labor supply, savings, educational attainment, capital investment, or employment. You may also discuss the aspects to be considered when conducting cost-benefit analysis. The paper should be no longer than five pages, and will be due near the end of the term.
Office Hours:
Professor Andreoni: Room 7434 Social Science, Wednesday 10:30-11:45,
and by appointment.
TA Joseph Guse: Room 7226 Social Sciences, Tuesdays 1-2:30 (before lecture),
Thursdays 3:45 - 5:00 (after lecture).
INTRODUCTION
A. Background (Rosen, Chapters 1, 2 )
B. Welfare Economics (Rosen, Chapters 3, 4 )
PART I: IS THERE A ROLE FOR THE GOVERNMENT?
A. Market Failure
Public Goods (Rosen, Chapter 5)
Externalities (Rosen, Chapter 6)
Joe Farrell, "Information and the Coase Theorem." Journal of Economic Perspectives, Fall 1987. Article
Tragedy of the Commons (Rosen, Chapter 7)
B. Public Choice (Rosen, Chapter 7)
Hal Varian, "A Solution to the Problem of Externalities When Agents are Well Informed." American Economic Review, 1994. Article
PART II: GOVERNMENT EXPENDITURES
A. Redistribution (Rosen, Chapter 8)
Neil Bruce and Michael Waldman, "Transfers In-kind: Why they can be Efficient and Non-Paternalistic." American Economic Review, December 1991. Article
B. Poverty Programs (Rosen, Chapter 9)
Rebecca Blank, "Fighting Poverty: Lessons from Recent U.S. History," Journal of Economic Perspectives, Spring 2000, 3-19. Article
Dan Meyer's Guest Lecture Notes
C. Social Security and Unemployment Insurance (Rosen, Chapter 10)
D. Health Care (Rosen, Chapter 11)
Larry Summers, "Some Simple Economics of Mandated Benefits." American Economic Review, May 1989, 177-183. Article
Ronald Lee and Jonathan Skinner, "Will Aging Baby Boomers Bust the Federal Budget?" Journal of Economic Perspectives, Winter 1999, 117-40. Article
E. Cost-Benefit Analysis (Rosen, Chapter 12)
Joel Waldfogel, "The Deadweight Loss of Christmas." American Economic Review, December 1993. Article
PART III: TAXATION
A. What is a Good Tax?
Tax Incidence (Rosen, Chapter 12)
Equity and Efficiency (Rosen, Chapters 13, 14)
B. The U.S. Tax System
Personal Income Taxes (Rosen, Chapter 15, 16)
Corporation Taxes (Rosen, Chapter 17)
Deficit Finance (Rosen, Chapter 18)
Consumption and Wealth Taxation (Rosen, Chapter 19)
State and Local Taxation (Rosen, Chapter 20)
See the TA web-site
RESEARCH PAPER PROPOSAL DUE APRIL 3
RESEARCH PAPER DUE MAY 1
Research Paper:
For the paper you must choose a proposed or legislated government policy to write about. The paper must describe the policy and provide an economic analysis of it. This could include a description of how the policy may affect economic behavior, such as labor supply, savings, educational attainment, capital investment, or employment. You may also discuss the aspects to be considered when conducting cost-benefit analysis. The paper should be no longer than five pages.
Finding a Topic.
There are several sources you could use to find a topic. One is simply to follow the policy debates in the newspapers and magazines. Second is to look at the policies discussed in the textbook for the course. A third way is to browse through recent issues of economic policy journals, or the web pages of research and policy institutions.
Some journals you could browse at the library are:
Here are some links to some sites that might prove useful:
Other links that could prove useful in your research are listed at the end of the web page.
Sample Topic Ideas.
Here are some examples of topics. Feel free to choose from these or find your own:
For more ideas on paper topics, with citations, go here
Writing a Proposal.
Everyone must submit a one-page Paper Topic Proposal. The proposal should contain the following:
Paper topic proposals are due April 3.
Final Drafts Due May 1.
Final drafts are due in class on May 1. Paper must be no longer than 5 pages.
Outlines and Early Drafts Welcome.
If you prepare your draft early and you would like preliminary comments from me, please arrange that with me a few days in advance and I will be happy to look at your paper. Note, I will only look at drafts of the completed paper, not sections or very rough drafts. Also, if you would like to discuss an outline for your paper before you begin writing, please type up your outline and make an appointment to see me.
E. INTERESTING LINKS FOR PUBLIC FINANCE:
Government
Journals
Data
Research Institutes, Working Papers