K2SP 3625 - Public Economics advanced

Objectives: This course will present the basic theory and applications of public economics, with an emphasis on recent empirical research and its policy implications. The course aims at providing a foundation in microeconomics for public policy while covering recent material. Description: The course starts by introducing the discipline of public economics and present the different functions of government in modern market economies, with a particular focus on redistribution and the mitigation of market failures. Regarding redistribution, we will cover different notions of social justice, as well as basic definitions and facts about income, wealth, and inequality. We will then introduce basic microeconomic tools for welfare analysis, and apply them to study the issue of taxation, notably (i) the distinction between the nominal and economic incidence of taxes and (ii) how the government, under different constraints in terms of tax instruments, can raise that revenue at a minimal efficiency cost. We will consider commodity taxation, and income taxation. We will then explore various causes of market failures and investigate to which extent public intervention can mitigate them. The first category of failures is externality, with applications to pollution and carbon emissions abatement. The second category is public goods. We will define the different types of public goods and see how to best organize their provision. The third category of market failure finds 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.

Aurel MÉLARD

Cours magistral seul

English

Lectures require having re-read and understood the content of previous lectures, as there is strong dependence of later sessions on earlier ones, especially at the beginning of the class. Method conferences require preparing exercises and reading articles whenever this is indicated.

Students should be familiar with solving basic optimization problems (constrained and unconstrained). A good command of the notions covered in the maths camp and in the evaluation of public policy course in S1 are expected to be sufficient. Revising or acquiring problem-solving skills in intermediate microeconomics will be useful, using 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, 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.

Spring 2023-2024

The course will be evaluated based on two assignments: - The midterm exam will be done from home and will consist of a referee report to write on a research paper related to the content of the class, and of two exercises. It will count for 40% of the overall grade. - The final exam will be done on table and will consist of true or false questions, and of exercises. It will count for 60% of the overall grade.