INTERMEDIATE PUBLIC ECONOMICS. second edition. Jean Hindriks and Gareth D. Myles. The MIT Press Cambridge, Massachusetts London, England

Transcription

1 INTERMEDIATE PUBLIC ECONOMICS second edition Jean Hindriks and Gareth D. Myles The MIT Press Cambridge, Massachusetts London, England

2 Preface to Second Edition Preface to First Edition List of Figures xxi xxiii xxv I PUBLIC ECONOMICS AND ECONOMIC EFFICIENCY An to Public Economics Public Economics Methods Analyzing Policy Preview Scope Equilibrium and Efficiency Economic' Models Competitive Economies The Exchange Economy Production and Exchange Efficiency of Competition Single Consumer Pareto-Efficiency Efficiency in an Exchange Economy 2.6:4 Extension to Production Lump-Sum Taxation Discussion of Assumptions Summary Behavioral Economics Behavioral Individuals Simple Example: How Much to Save? Present-Bias " The (0, S) Model of Self-Control Reference-Dependence Bias The Gambler's Fallacy

3 viii II GOVERNMENT Confirmation Bias Confidence Bias Framing Bias Conformism Bias Identity and Social Norms 3.3 Behavioral Markets Money Pump Complementary Mistakes Rationality Tug'of-War Behavioral Policy Internalities versus Externalities Automatic Enrollment The SMarT Plan Complementarity Behavioral Welfare New Welfare Criterion Choice-Based Welfare Analysis Refinement and Structural Modeling Application: Global Warming \ Other-Regarding Preferences Ultimatum Game Social Preferences Market Impact ' 80 4 Public Sector Statistics Historical Development Composition of Expenditure Revenue Government Debt ' Measuring the Government

4 Theories of the Public Sector Justification for the Public Sector The Minimal State Market versus Government Equity» Efficiency and Equity Public Sector Growth , DevelopmenfModels Wagner's Law Baumol's Law A Political Model Ratchet Effect Excessive Government ; Bureaucracy Budget-Setting Monopoly Power ' Corruption Government Agency Cost Diffusion III DEPARTURES FROM EFFICIENCY 6 Public Goods Definitions ' Private Provision Efficient Provision Voting Personalized Prices Mechanism Design Examples of Preference Revelation Clarke-Groves Mechanism Clarke Tax Further Comments 169

5 6.8 More on Private Provision Neutrality and Population Size Experimental Evidence Modifications Fund-Raising Campaigns ' The Contribution Campaign The Subscription Campaign '"'"" , Club Goods and Local Public Goods Definitions Single-Product Clubs Fixed Utilization Variable Utilization Two-Part Tariff Clubs and the Economy Small Clubs Large Clubs Conclusion Local Public Goods The Tiebout Hypothesis Empirical Tests Externalities, ' Externalities Defined Market Inefficiency Externality Examples River Pollution Traffic Jams Pecuniary Externality The Rat Race Problem The Tragedy of the Commons Bandwagon Effect Pigouvian Taxation Licenses ,' 216 '

6 xi Internalization The Coase Theorem Nonconvexity Imperfect Competition Concepts of Competition Market Structure Defining the Market Measuring Competition Welfare Inefficiency Incomplete Information Measures of Welfare Loss Tax Incidence Specific and Ad valorem Taxation Regulation of Monopoly Regulation of Oligopoly Detecting Collusion Merger Policy Unions and Taxation Monopsony \ Asymmetric Information Hidden Knowledge and Hidden Action Actions or Knowledge? Market Unraveling Hazard Insurance Government Intervention Screening Perfect Information Equilibrium Imperfect Information Equilibrium Government Intervention Signaling Educational Signaling Implications 321

7 xii 10.7 Moral Hazard (Hidden Action) Moral Hazard in Insurance Effort Observable Effort Unobservable Second-Best Cdhtract Government Intervention Public Provision of Health Care Efficiency Redistributive Politics Evidence IV POLITICAL ECONOMY Voting Stability Impossibility Majority Rule May's Theorem Condorcet Winner Median Voter Theorems Multidimensional Voting Agenda Manipulation Alternatives to Majority Rule 361 \ Borda Voting Plurality Voting Approval Voting Runoff Voting The Paradox of Voting The "Alabama" Paradox Political Competition Downsian Model Policy Divergence Multidimensional Competition "Swing Voter" Politics Citizen-Candidate Model

8 xiii Rent-Seeking Definitions Rent-Seeking Games Deterministic Game Probabilistic Game Free-Entry Risk Aversion Social Cost of Monopoly Equilibrium Effects - Government Policy Lobbying Rent Creation Informative Lobbying Controlling Rent-Seeking V EQUITY AND DISTRIBUTION 13 Optimality and Comparability Social Optimality *",' Lump-Sum Taxes Impossibility of Lump-Sum Taxes Redistribution In-Kind Aspects of Pareto-Efficiency Social Welfare Functions Arrow's Theorem Interpersonal Comparability Comparability and Social Welfare Inequality and Poverty Measuring Income Equivalence Scales 460

9 Inequality Measurement The Setting Statistical Measures Inequality and Welfare An Application Poverty Poverty and the Poverty Line Poverty^ Measures Two Applications Unequal Opportunities Defining Equality of Opportunity Measuring Equality of Opportunity Equal-Opportunity Policy Intergenerational Inequality Measuring Issues Causal Mechanisms 466 ' VI TAXATION Commodity Taxation Deadweight Loss Optimal Taxation Production Efficiency Tax Rules, Inverse Elasticity Rule Ramsey Rule Equity Considerations Applications Reform Optimality Efficient Taxation Public Sector Pricing : ' Income Taxation Equity and Efficiency 538

10 XV Taxation and Labor Supply Empirical Evidence Optimal Income Taxation Two Specializations Quasi-Linearity Rawlsian Taxation Numerical Results Voting over a Flat Tax VII MULTIPLE JURISDICTIONS Tax Evasion The Extent of Evasion The Evasion Decision Auditing and Punishment Evidence on Evasion Effect of Honesty Tax Compliance Game Behavioral Models Compliance and Social Interaction Limits to Redistribution Revelation Principle 609 The Tax Principle 614 Tax Mix: Separation Principle 620 Capital Income Tax 624 Non-Tax Redistribution Fiscal Federalism Arguments for Multi-level Government Costs of Uniformity Tiebout Hypothesis Distributive Arguments 640

11 xvi 19.3 Optimal Structure: Efficiency versus Stability Accountability Risk-Sharing Voluntary Risk-Sharing Insurance versus Redistribution Hard and Soft Budgets f Evidence on Decentralization Decentralization around the World Decentralization by Functions Determinants of Decentralization \ \ Fiscal Competition Tax Competition Competitive Behavior Strategic Behavior Size Matters Public Input Provision Tax Overlap Tax Exporting Efficient Tax Competition Income Distribution Perfect Mobility Imperfect Mobility Race to the Bottom Intergovernmental Transfers Efficiency Redistribution Flypaper Effect Evidence Race to the Bottom Race to the Top Tax Mimicking Issues in International Taxation ;

12 xvii 21.2 International Efficiency Efficient Allocations Markets and Efficiency Taxation and Efficiency Capital and Corporations Capital Taxes ' Corporate Taxation Formula Apportionment Summary Transfer Pricing Location Locational Choice Agglomeration Rents Evidence Harmonization of Taxes Tax Principles Tariff Policy " Welfare Cost of Tariffs ', Trade Agreements " VIII ISSUES OF TIME 22 Intertemporal Efficiency, Overlapping Generations 753 ' Time and Generations Consumers Production Equilibrium Intertemporal Equilibrium Steady State Optimality and Efficiency The Golden Rule Pareto-Efficiency Testing Efficiency

13 xviii Social Security Types of System The Pensions Crisis The Simplest Program Social Security and Production Population Growth Sustaining a Program Ricardian Equivalence Social Security Reform Economic Growth Exogenous Growth Constant Savings Rate Optimal Taxation Endogenous Growth Models of Endogenous Growth Government Expenditure Policy Reform Empirical Evidence IX APPLICATIONS 25 Cost-Benefit Analysis ; What Is Cost-Benefit Analysis? Simple Example Broader Approach The Process of CBA Discounting Future Values, Principles of CBA Common Unit of Measurement Revealed Preferences Valuing Market Goods: Marshallian Surplus 858

14 xix Valuing Valuing Non-market Goods: Hedonic Prices Impact Assessment Decision Criteria Difficulties for CBA Life Valuing the Future Intertemporal Arbitrage The UK Green Book Adjustment for Risk Theoretical Foundations of CBA Social Welfare Evaluation Distributive Weights Market Prices and Shadow Prices Economics of Climate Policy Special Features The Science of Global Warming Greenhouse Gases and Temperatures Controversies Predictions Integrating Economics and Climate Sources of Damage Modeling Economic Damage Effects of Policy Competing Generations Ecological Discounting Climate Policy in Practice Pricing and Policies The EU Emissions Trading Scheme International Agreements Prices or Quantities Further Policies Index 947