Public Economics
A.Y. 2024/2025
Learning objectives
The aim of this module is to provide students with an overview of some major issues of modern public economics. The module will allow students to understand the normative and positive effects of government intervention in the economy. The module will start by considering the role of government as a provider of goods and services and as a regulator of private economic activities in modern market economies and how it raises funds via taxation to finance its functions. The module will then proceed by presenting the efficiency and equity reasons for government intervention and the economic effects and design of commodity and income taxation.
Expected learning outcomes
Applying knowledge and understanding: By the end of the module students will be equipped with analytical tools for understanding why government provision is desirable for some goods and services but not for others; why and how governments should regulate some but not all private economic activities; how taxation and transfers affect welfare and behaviour of households and firms.
Making judgements: By the end of the module, students should know how to use economic analysis to make informed judgements about the level and composition of government spending and taxation that result from actual government policies.
Communication skills: Although the module is lecture-based, students will be able to test their understanding and ability to communicate knowledge of the relevant topics by self-assessment tests. These tests will be made available on the module Ariel website as the module proceeds.
Learning skills: Throughout the module, topics will be presented mainly by using theoretical models, although reference to public sector data and actual government policies will be made continuously. By the end of the module, students should be able to understand and explain the economic content, assumptions, limitations, policy implications and relevance of the models presented.
Making judgements: By the end of the module, students should know how to use economic analysis to make informed judgements about the level and composition of government spending and taxation that result from actual government policies.
Communication skills: Although the module is lecture-based, students will be able to test their understanding and ability to communicate knowledge of the relevant topics by self-assessment tests. These tests will be made available on the module Ariel website as the module proceeds.
Learning skills: Throughout the module, topics will be presented mainly by using theoretical models, although reference to public sector data and actual government policies will be made continuously. By the end of the module, students should be able to understand and explain the economic content, assumptions, limitations, policy implications and relevance of the models presented.
Lesson period: Second trimester
Assessment methods: Esame
Assessment result: voto verbalizzato in trentesimi
Single course
This course can be attended as a single course.
Course syllabus and organization
Single session
Responsible
Lesson period
Second trimester
Course syllabus
Study program for attending students:
1. WHAT DO GOVERNMENTS DO? What is Public Economics? Public sector statistics: international comparisons. Justifications of the economic role of the state. Theories of public sector growth. Government failures: excessive governments, corruption, lobbying.
2. WELFARE ECONOMICS IN MARKET ECONOMIES: EQUILIBRIUM AND EFFICIENCY. The first and second fundamental theorems of welfare economics.
3. MARKET FAILURES: PUBLIC GOODS. Definitions. Private provision. Efficient provision: the Samuelson theorem. Free riding vs. altruism. Voting. Personalized prices: Lindahl equilibrium. Public provision vs private provision. Global public goods (if time allows).
4. MARKET FAILURES: EXTERNALITIES. Definitions. The tragedy of the commons. Pigouvian taxation. Taxes vs. quotas. The Coase theorem. Climate change (if time allows).
5. MARKET FAILURES: IMPERFECT COMPETITION. Monopoly. Welfare loss of monopoly. Regulation of monopoly. Natural monopoly: Public ownership vs. Public regulation. Monopsony. Minimum wages.
6. MARKET FAILURES: ASYMMETRIC INFORMATION. Adverse selection (hidden knowledge) and Moral hazard (hidden action). Public provision of health care. Cash vs. in-kind transfers.
One or two of the following topics (depending on time)
7. REDISTRIBUTION: NORMATIVE AND POSITIVE ISSUES (selected topics). Social optimality. Lump-sum taxes. Impossibility of lump-sum taxes. Social welfare functions. Inequality: measurement and evidence. Inequality and welfare.
8. TAXATION (selected topics). Commodity taxation: tax incidence and the role of market structure. Deadweight loss of taxation. Optimal commodity taxation. Income taxation. Taxing multinationals.
9. TAX EVASION (if time allows). The rational taxpayer's evasion decision. Honesty. Social interactions. Behavioural models.
Study program for not attending students:
1. An introduction to public economics.
2. Equilibrium and efficiency.
3. Public sector statistics.
4. Theories of the public sector.
5. Public goods.
6. Externalities.
7. Imperfect competition.
8. Asymmetric information.
9. Voting.
10. Equity and redistribution: Optimality and comparability.
11.Commodity taxation.
12. Income taxation.
13. Tax evasion.
1. WHAT DO GOVERNMENTS DO? What is Public Economics? Public sector statistics: international comparisons. Justifications of the economic role of the state. Theories of public sector growth. Government failures: excessive governments, corruption, lobbying.
2. WELFARE ECONOMICS IN MARKET ECONOMIES: EQUILIBRIUM AND EFFICIENCY. The first and second fundamental theorems of welfare economics.
3. MARKET FAILURES: PUBLIC GOODS. Definitions. Private provision. Efficient provision: the Samuelson theorem. Free riding vs. altruism. Voting. Personalized prices: Lindahl equilibrium. Public provision vs private provision. Global public goods (if time allows).
4. MARKET FAILURES: EXTERNALITIES. Definitions. The tragedy of the commons. Pigouvian taxation. Taxes vs. quotas. The Coase theorem. Climate change (if time allows).
5. MARKET FAILURES: IMPERFECT COMPETITION. Monopoly. Welfare loss of monopoly. Regulation of monopoly. Natural monopoly: Public ownership vs. Public regulation. Monopsony. Minimum wages.
6. MARKET FAILURES: ASYMMETRIC INFORMATION. Adverse selection (hidden knowledge) and Moral hazard (hidden action). Public provision of health care. Cash vs. in-kind transfers.
One or two of the following topics (depending on time)
7. REDISTRIBUTION: NORMATIVE AND POSITIVE ISSUES (selected topics). Social optimality. Lump-sum taxes. Impossibility of lump-sum taxes. Social welfare functions. Inequality: measurement and evidence. Inequality and welfare.
8. TAXATION (selected topics). Commodity taxation: tax incidence and the role of market structure. Deadweight loss of taxation. Optimal commodity taxation. Income taxation. Taxing multinationals.
9. TAX EVASION (if time allows). The rational taxpayer's evasion decision. Honesty. Social interactions. Behavioural models.
Study program for not attending students:
1. An introduction to public economics.
2. Equilibrium and efficiency.
3. Public sector statistics.
4. Theories of the public sector.
5. Public goods.
6. Externalities.
7. Imperfect competition.
8. Asymmetric information.
9. Voting.
10. Equity and redistribution: Optimality and comparability.
11.Commodity taxation.
12. Income taxation.
13. Tax evasion.
Prerequisites for admission
Knowledge of the contents of the Mathematics and Microeconomics modules is requested.
Teaching methods
Lectures. Self-evaluation tests (with answers) will be made available on the ARIEL website on a weekly basis as the course proceeds. There will be no classes. However, examples of solved exercises will be presented during lectures. Weekly QA sessions (online on MT) may be offered on demand from at least five students. Attendance to the QA sessions is voluntary.
Teaching Resources
For attending students:
-Slides of lectures;
-Hindriks J. and Myles G.D. (2013, 2nd edition). Intermediate public economics, MIT PRESS, ch.s 1, 2, 4, 5, 6, 8, 9 (pp. 264-288), 10 (247-314, 323-336), 12 (pp. 398-401), 13 (pp. 423-441, 443-450), 14 (pp.466-481, 481-92 if time allows), 15, 16 (pp.537-546), 17 (selection, if time allows). Further optional readings on each topic of the program will be suggested at the start of the course.
For not attending students:
- Hindriks J. and Myles D. G. (2013, 2nd edition). Intermediate public economics, MIT PRESS, ch. 1, 2, 4, 5, 6, 8, 9, 10, 11, 13, 15, 16, 17.
Alternatively, students not attending the course can base their study program on:
- Silvestre, J., (2012) Public microeconomics: Efficiency and equity in public policy, Cheltenham, UK: Edward Elgar;
- Hindriks J. and Myles D. G. (2013, 2nd edition). Intermediate public economics, MIT PRESS, ch.s 15, 16 and 17. Students not attending the course who are willing to adopt the alternative study program must contact the teacher in advance of their preparation for the examination.
-Slides of lectures;
-Hindriks J. and Myles G.D. (2013, 2nd edition). Intermediate public economics, MIT PRESS, ch.s 1, 2, 4, 5, 6, 8, 9 (pp. 264-288), 10 (247-314, 323-336), 12 (pp. 398-401), 13 (pp. 423-441, 443-450), 14 (pp.466-481, 481-92 if time allows), 15, 16 (pp.537-546), 17 (selection, if time allows). Further optional readings on each topic of the program will be suggested at the start of the course.
For not attending students:
- Hindriks J. and Myles D. G. (2013, 2nd edition). Intermediate public economics, MIT PRESS, ch. 1, 2, 4, 5, 6, 8, 9, 10, 11, 13, 15, 16, 17.
Alternatively, students not attending the course can base their study program on:
- Silvestre, J., (2012) Public microeconomics: Efficiency and equity in public policy, Cheltenham, UK: Edward Elgar;
- Hindriks J. and Myles D. G. (2013, 2nd edition). Intermediate public economics, MIT PRESS, ch.s 15, 16 and 17. Students not attending the course who are willing to adopt the alternative study program must contact the teacher in advance of their preparation for the examination.
Assessment methods and Criteria
Students attending the course will take a mid-term written examination (weighting 50% of the overall examination mark and lasting 45 minutes) and an end-of-term written examination (weighting 50% of the overall examination mark and lasting 1 hour and 30 minutes). Each examination script will consist of five multiple choice tests and of two open questions, which may include numerical exercises. Examples of examination questions presented in the examination format will be uploaded on the ARIEL course website as the course proceeds. If a student fails the examination/declines the mark, s/he will be able to resit it twice based on the attending students examination program. Alternatively, the student can sit any examination session based on the not attending students examination program.
Students not attending the course will take a one-hour-and-half written examination. The examination script will consist of six multiple choice tests and of two open questions. Examples of examination questions presented in the examination format will be uploaded on the ARIEL course website.
Students not attending the course will take a one-hour-and-half written examination. The examination script will consist of six multiple choice tests and of two open questions. Examples of examination questions presented in the examination format will be uploaded on the ARIEL course website.
SECS-P/03 - PUBLIC ECONOMICS - University credits: 9
Lessons: 60 hours
Professor:
Santoni Michele
Shifts:
Turno
Professor:
Santoni MicheleEducational website(s)
Professor(s)
Reception:
Next office and feedback hours. Fri 6/12, 13/12, 20/12 at 8:30-11:30 hh.
Online on MT.