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Course Syllabus

Master 2020/2021

Public Economics

Category 'Best Course for Broadening Horizons and Diversity of Knowledge and Skills'
Type: Compulsory course (Population and Development)
Area of studies: Public Administration
Delivered by: Department of Applied Economics
Where: Faculty of Social Sciences
When: 1 year, 1, 2 module
Mode of studies: offline
Open to: students of one campus
Instructors: Marina Kolosnitsyna, Igor L. Shagalov
Master’s programme: Population and Development
Language: English
ECTS credits: 5
Contact hours: 48

Course Syllabus

Full Syllabus

Abstract

This introductory course in Public Economics covers basic issues including a role of government in modern market economies, market failures and public goods, equity-efficiency trade-offs, public expenditure programmes, and taxation principles. It combines theoretical models with empirical evidence. Objectives and instruments of public policies are demonstrated with examples of health care, pensions, education, housing, crime control, and welfare programmes. General principles of cost-benefit analysis are introduced. The course ends in discussion of increasing government size, its underlying roots, and possible solutions for public spending reduction.
Learning Objectives

Learning Objectives

  • The goal of this course is to develop knowledge and skills for analysis of public economics issues, including efficiency of public policy measures in different fields such as taxation and public spending programmes.
Expected Learning Outcomes

Expected Learning Outcomes

  • Знание определения общественного сектора, его основных составляющих, способов измерения его размеров и динамики.
  • Знание основных провалов рынка, понятий общественных благ и благ с особыми достоинствами. Знание основных аргументов государственного вмешательства в экономику с позиций экономической эффективности.
  • Знание основных целей государственного вмешательства в экономику. Понимание конфликта экономической эффективности и социальной справедливости. Знание различных подходов к перераспределению с позиций функций общественного благосостояния.
  • Знание основных типов налогов и их различий. Понимание искажающего действия налогов. Знание основных условий эффективной налоговой системы. Понимание последствий неэффективности налоговой системы, легального и нелегального уклонения от налогов. Знание способов оценки размеров теневой экономики.
  • Знание основных условий функционирования частных страховых рынков и аргументов государственного вмешательства. Знание преимуществ социального страхования перед частным. Знание основных принципов, отличий, достоинств и недостатков различных принципов построения пенсионных систем.
  • Понимание аргументов существования систем социальной помощи и их отличий от социального страхования. Знание основных критериев эффективности социальной помощи. Знание отличий категориального и адресного подходов к социальной помощи, их достоинств и недостатков.
  • Понимание здоровья как экономического блага и аргументов государственного вмешательства на рынках медицинской помощи. Знание основных принципов и проблем частного медицинского страхования. Знание инструментов госвмешательства, проблем их эффективности.
  • Понимание роли образования в экономической системе, экстерналий образования. Знание концепции инвестиций в человеческий капитал. Знание основных инструментов вмешательства государства на рынках образовательных услуг, их эффективности.
  • Знание аргументов госвмешательства на рынках жилья, понимание экстерналий и других провалов рынка в жилищной сфере. Знание основных инструментов госвмешательства, проблем их эффективности.
  • Понимание экстерналий преступной деятельности и аргументов государственного вмешательства. Знание типов государственного вмешательства и условий его эффективности.
  • Знание подходов к оценке издержек и выгод в общественном секторе, включая неденежные экстерналии. Понимание отличий социальной и частной ставок дисконтирования. Понимание необходимости оценок рисков проектов. Знание способов выявления теневых цен.
  • Знание основных теоретических моделей, объясняющих рост госрасходов. Знание основных способов сокращения госрасходов в экономике.
Course Contents

Course Contents

  • Public sector in modern economies
    What is the public sector? Government in a narrow sense. Governmental budget, special funds, institutions and organizations. How to measure the government? Public spending as a share of GDP. Public employment. Government size and growth in modern economies: empirical evidence.
  • Market economy and arguments for governmental interventions
    How markets work? Simple model of market equilibrium. Market efficiency and market failures. Competition failures, externalities, information failures. Incomplete markets. Unemployment and inflation. Public goods and merit goods. Types of state intervention. Seminar: group discussion. Conscript versus voluntary army.
  • Social objectives and social choice
    Major goals of the modern welfare state. Equity and efficiency trade-offs. Social indifference curves and social welfare function. Various approaches to redistribution. Redistribution in practice: poverty line and inequality indices.
  • Taxes and tax incidence; tax evasion and shadow economy
    Lectures: Taxation aims and principles. Types of taxes. Direct and indirect taxes. Tax burden and tax incidence. Taxation and efficiency. Tax distortions. Optimal taxation. Tax avoidance and tax evasion. Tax evasion. Seminar: students’ presentations on taxation systems (5 groups). Seminar: students’ presentations on shadow economy issues.
  • Social insurance and pension programmes
    Lectures: Private markets for insurance. Necessary conditions for private markets existence. Incomplete insurance markets and governmental interventions. Social vs. private insurance. Pension programmes: rationales for state intervention. Types of pension programmes: PAYG or fully-funded systems? Pro et contra. Ageing crisis and pension systems reforms. Seminar: students’ presentations on pension system reforms.
  • Social assistance and welfare programmes
    Lecture: Social assistance vs. social insurance. Rationale for state interventions in case of poverty or income inequality. Social benefits: horizontal and vertical efficiency. Types of social benefits: categorical or means-tested? Pro et contra. Motivation issues: what is wrong with a free lunch? Workfare vs. welfare. Seminar: students’ presentations on social assistance systems.
  • Health care
    Lecture: Health care: private or public good? Rationale for state interventions in health care. Incomplete information, agent’s problem, supplier-induced demand. Cream-skimming on health insurance markets. Types of governmental interventions: public health care system, or social health insurance? Mixed systems. Seminar: role-playing game “Adverse selection in medical insurance”.
  • Education
    Lecture: Education: private or public good? Rationale for state interventions in education system. Education as human capital: direct and indirect costs and benefits. Externalities of education. Types of governmental interventions: public educational system, or state-financed private schools? Quasi-markets for education: voucher system. Seminar: students’ presentations on educational systems reforms.
  • Housing
    Housing: rationale for state interventions. Housing and well-being. Externalities. House markets bubbles. Types of governmental interventions: regulation, financing, provision. Subsidized housing: who benefits? Seminar: students’ presentations on housing issues
  • Crime control and prevention
    Lecture: Private and social costs of crime. Market crime prevention: efficiency issues. Governmental crime prevention services: efficiency condition. Severity of punishment vs. probability of punishment. Seminar: students’ presentations on crime issues.
  • Cost-benefit analysis for economic policies
    Lecture: Private cost-benefit analysis and NPV concept. Social cost-benefit analysis. Non-monetary costs and benefits: valuing time and life. Market and shadow prices. Risk evaluation. Social discount rate. Cost-effectiveness comparisons. Seminar: students divided in small groups valuate their leisure time, than comparing results.
  • Government’s growth and policies reducing public spending
    Theoretical models and arguments explaining public expenditure growth. Wagner’s law, Peacock-Wiseman model, Baumol disease, Niskanen bureaucracy model, redistribution, political influence. Policies to reduce public spending: valuing public services, quasi-markets, privatization of public functions and institutions, outsourcing, better targeting of social benefits.
Assessment Elements

Assessment Elements

  • non-blocking Intermediate test
  • non-blocking Class attendance
  • non-blocking Class activities
  • non-blocking Final exam
Interim Assessment

Interim Assessment

  • Interim assessment (2 module)
    0.4 * Class activities + 0.1 * Class attendance + 0.3 * Final exam + 0.2 * Intermediate test
Bibliography

Bibliography

Recommended Core Bibliography

  • Auerbach, A. J. (2013). Handbook of Public Economics. Amsterdam: North Holland. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=485505

Recommended Additional Bibliography

  • Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics, (3–4), 323. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.pubeco.v1y1972i3.4p323.338
  • Arrow, K. J. (2004). Uncertainty and the welfare economics of medical care. 1963. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.D1FE5630
  • Atkinson, A. B. (1995). Is the Welfare State necessarily an obstacle to economic growth? European Economic Review, (3–4), 723. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.eecrev.v39y1995i3.4p723.730
  • Besley, T., & Coate, S. (1992). Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs. American Economic Review, (1), 249. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.aea.aecrev.v82y1992i1p249.61
  • Blank, R. M. (2000). When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services. Economic Journal, (462), 34. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecj.econjl.v110y2000i462pc34.49
  • James M. Poterba. (1994). Government Intervention in the Markets for Education and Health Care: How and Why? NBER Working Papers. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.nbr.nberwo.4916
  • Nicholas Barr, & Peter Diamond. (2006). The Economics of Pensions. Oxford Review of Economic Policy, (1), 15. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.oup.oxford.v22y2006i1p15.39
  • Persson, T., & Tabellini, G. (1999). The size and scope of government:: Comparative politics with rational politicians. European Economic Review, (4–6), 699. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.eecrev.v43y1999i4.6p699.735
  • Victor R. Fuchs. (2018). The Supply of Surgeons and the Demand for Operations. World Scientific Book Chapters, 171. https://doi.org/10.1142/9789813232877_0016
  • White, M. J., & White, L. J. (1977). The tax subsidy to owner-occupied housing: Who benefits? Journal of Public Economics, (1), 111. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.pubeco.v7y1977i1p111.126