EconS 583  Public Economics

: Dr. Raymond G. Batina


Office: 203J Hulbert Hall

Office Hours: MW 830 - 9, MWF 10 - 11, and MW 315 - 4 by appointment.

Prerequisites: Econs 500 - 503

Classroom: Hulbert 27

Class meeting time: MWF 1400 - 1510.

Learning goals and outcomes:
Goals: The course analyzes the theory and empirical aspects of the literature on taxation and public spending necessary for understanding the current research in Public Economics. We use static and dynamic modeling, and various empirical techniques appropriate to the literature. We will apply the microeconomic tools of the individual decisionmaker, game theory models of strategic interaction among agents, general equilibrium analysis, and the dynamics of macroeconomic models, in studying various aspects of behavior relating to taxation and public spending policies. Our main objective is to strengthen the student's knowledge of public policy issues involving taxation and public spending programs in order to facilitate their ability to do research using these tools.

Outcomes: The student will demonstrate the ability to think critically and to use appropriate concepts, models, and theory to study public policy issues. Students will demonstrate the ability to work with models, structure an argument, provide supporting evidence, and identify the impact of a policy.

Class attendance: Mandatory

Method of evaluation:
Problem sets and projects will be assigned and discussed in class. Everyone is expected to present papers on the reading list. Here are some guidelines for the presentations.

Problem sets, 30%
Presentations, 40%
Projects, 30%

A 90 - 100%
B 80 - 89%
C 70 - 79%

Tentative class schedule:

week 1 ….. labor supply, savings
week 2 ….. savings, complexity
week 3 ….. preference generation
week 4 ….. human capital, CSC hypothesis
week 5 ….. Laffer curve
week 6 ….. Laffer curve, debt
week 7 ….. Debt, open economy taxation
week 8 ….. ETI 
week 9 ….. Optimal tax theory
week 10 ….. Taxing capital
week 11 ….. Taxing income; progressivity
week 12 ….. Public goods
week 13 ….. Privately provided public goods
week 14 ….. Public capital, social insurance
week 15 ….. Social Insurance

Class reading list
(associated with the schedule):

1.  Financing Government

     A.     How do taxes and spending affect economic behavior?

          i.     Labor supply

             Meghir, Blundell, (Mirrlees Review, 2010),
             Prescott and Wallenius (Fed Reserve Bank of Mpls, 2012)

             Jantti, Pirttilla, and Selin (JPubE, 2015)

          ii.     Savings

             Attanasio, (Mirrlees Review, 2010)

          iii.    Tax Salience and tax complexity

             Chetty, et al., (AER, 2009),

            Abeler and Jager (AEJ Public Policy, 2015)

          iv.     Preference generation

            Becker, et. al (2014)
            Lindbeck and Nyberg (QJE, 2006)            

           v.    Human capital and the family

            Kirchsteiger and Sebald (EER, 2010)

            Raut and Tran (JDevE, 2003)

            Jacobs (IntTaxPubFin, 2013)

           vi.     The capital skilled labor hypothesis

             Goldin and Katz (QJE, 1998)

             Krusell, Ohanian, Rios-Rull, Violante (RESTUD, 1997), 

             Duffy, Papageorigiou, and Sebastian (Working paper, 2003)


     B.     Supply side tax cuts and the Laffer curve

            i.    Theory:
            Lucas (OxEcPprs, 1990)
            Yakita (JPubE, 2003)

            Agell and Persson (JMonE, 2001)

            ii.    Empirical Tests of tax cuts on spending behavior:
            Shapiro and Slemrod (AER, 2009)

            Parker, Soulesles, Johnson, and McClelland (AER, 2013)

            Huntley and Michelangeli (AEJ: Macroeconomics, 2014)

            Trabandt and Uhlig, (JMonE, 2011)


     C.     Government debt

            Diamond (AER, 1965), 

            Carmichael (AER, 1982), 

            Yakita (JPubE, 2008)

Martin (REcDyn, 2009)


     D.     Open economy taxation and policy competition

          i.     Basic theory

            Zodrow and Mieszkowski (PUrbEc, 1986), 

            Keen and Marchand (JPubE, 1997), 

            Borck (FinanzArchiv, 2005)

Matsumoto (IntTaxPbFin, 2010)

          ii.     Empirical  models

Devereaux, Lockwood, and Redoano (JPubE, 2007, JPubE, 2008)

            Winner (Contemporary Economics, 2012)

    E.    Estimating tax elasticities
            Feldstein (JPE, 1995)

            Saez (RESTUD, 2001)
            Kopczuk (JPubE, 2005)
            Romer and Romer (AEJ: Economic Policy, 2014)

2.     Optimal Taxation

     A.     General principles of optimal taxation      

            Diamond and Mirrees (AER, 1971a, 1971b), 

            Atkinson and Stiglitz (JPubE, 1976),


     B.     Taxing labor and capital

            Atkinson and Sandmo (EJ, 1980), 

            Chamley (EMET, 1986), 

            Erosa and Gervais (JET, 2002), 

            Atkeson, Chari, and Kehoe (Fed Res Bank of Mpls Quarterly Review, 1999),

            Conesa, Kitao, Krueger (AER, 2009)


     C.     Income taxation

            Mirrlees (RESTUD, 1971), 

            Sheshinski (RESTUD, 1972), 

            Dixit and Sandmo (SJE, 1977), 

            Conesa and Krueger (JMonE, 2006)

            Banks and Diamond (Mirrlees Review, 2011) 

            Brewer, Saez, and Shephard (Mirrlees Review, 2011)

            Piketty, Saez, Stantcheva (NBER, 2013)

            Auberge and Columbino (SJEc, 2013)


3.     Public goods

     A.     Basic theory

            Samuelson (RESTAT, 1954), 

            Atkinson and Stern (EJ, 1974), 

            Diamond (JPubE, (JPubE, 1975)

            King (JPubE, 1986),

            Pirttila and Tuomala (JPubE, 2001)

            Nakabayashi (JPubE, 2010)


     B.     Privately produced public goods

            Bergstrom, Blume, and Varian (JPubE, 1986), 

            Warr (JPubE, 1982, Econ Letters, 1983), 

            Andreoni (JPubE, 1988, EJ, 1990),
            Saez (JPube, 2004)
            Diamond (JPube, 2006)

            Schokkaert (Working Paper, 2003)


     C.     Public capital

            Aschauer (JMonE, 1989),

            Pereira and Andraz (2013)
            Glomm and Ravikumar (JEcDynControl, 1997),
            Gomez (JPET, 2014)


4.  Social insurance
            Feldstein (JEconPersp, 2005)            
            Auerbach and Lee (JPube, 2011)
            Mateos-Planas, (JPubE, 2008)
            Gonzalez-Eiras, and Niepelt (JMonEcon, 2008)        

            Fenge and von Weizsacker (JPopulEc, 2010)

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Disability Statement
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