KAFP 3355 - Public Economics - Level 3

The course starts by introducing the discipline of public economics and present the different functions of government in modern market economies and how it evolved over the last century. (1) It then reviews basic microeconomic results in a world under perfect competition where the invisible hand is at work and where public intervention cannot be justified on the basis of efficiency. We will then explore various causes of market failures and investigate to which extent public intervention can mitigate them. (2) The first category of failures is externality. (3) The second category is public goods. We will define the different types of public goods and see how to best organize their provision. (4) The third category of market failure find its root in asymmetric information, giving rise to adverse selection and moral hazard issues. We will look at applications in different markets and see how private information can justify the provision of social insurance, an increasingly prominent function of the government. (5) The fourth market failure, we will study is the issue of market power and concentrated markets. To do this, we will introduce tools and equilibrium concepts from game theory. (6) We will conclude by studying the issue of taxation, notably: a. the distinction between the statutory and economic incidence of taxes b. how the government, under different constraints in terms of tax instruments, can raise public revenue at a minimal efficiency cost c. the justification for different type of taxes

Arthur GUILLOUZOUIC--LE CORFF,Antonela MIHO

Cours magistral et conférences

English

- Do the readings indicated in the syllabus – either before or after the class - Do the exercises in the tutorial session.

The class will focus on substantive issues and not formalization. However, students should be familiar with solving basic optimization problems (constrained and unconstrained) and have a solid knowledge of intermediate microeconomics. A student should master (or to quickly grasp) the content of textbooks such as: Walter Nicholson, Microeconomic Theory: Basic Principles and Extensions Hal Varian, Intermediate Microeconomics. A basic knowledge of statistics and empirical methods in applied economics is required to make the most out of the readings, although intuitive explanations of relevant empirical findings will be given in class. A good reference is: Stock, James H. and Mark W. Watson. Introduction to Econometrics.

Autumn 2022-2023

1. Midterm = problem sets + essay questions in groups of 2 to 3 students (take-home exam) - 50% 2. Final exam = problem sets + essay questions, individual grading - 50% Bonus grade (counted only if it increases the overall grade) = Summarize/criticize an academic article (take-home exam, in groups of 2 to 3 students).

In addition to the 12 lecture classes, students are required to participate in 6 tutorial classes.