API-130: PUBLIC ECONOMICS IN INTERNATIONAL PERSPECTIVE

Transcription

1 Monica Singhal API-130 Harvard University Spring 2015 John F. Kennedy School of Government API-130: PUBLIC ECONOMICS IN INTERNATIONAL PERSPECTIVE COURSE OVERVIEW Explores the causes and consequences of differences among governments alternative approaches to fundamental public policy issues. Takes a cross-country comparative approach to study topics including: the role of the government in the economy, social insurance, welfare, retirement systems, health care, fiscal federalism, local public goods, tax efficiency, and tax reform. The course incorporates selected topics of particular importance in developing countries, such as informal insurance, credit constraints, tax compliance, and public sector accountability. Strong emphasis is placed on understanding empirical methods used in the economic analysis of public policy. Prerequisites: Microeconomics and statistics/econometrics at the level of API- 109/110 or API-101A/102A and API-209/210 or API-201A/202A. Open to others with permission of the instructor. Class Time: Mondays and Wednesday 10:10 11:30 AM; RG-20 TEACHING STAFF Professor: Monica Singhal Taubman 340 monica_singhal@harvard.edu (617) Office Hours: Wednesdays, 1:30 3:30 PM Faculty Assistant: Gina Abbadessa (T485, gina_abbadessa@hks.harvard.edu, (617) ) Teaching Fellow: Diana Moreira (dianasbm@gmail.com)

2 REQUIREMENTS There will be a total of five written assignments, a midterm examination and a final examination. Students are encouraged to work on assignments in small groups of no more than four students. Assignments must be written up separately and must include the names of the other group members. The lowest assignment grade will be dropped. I strongly encourage students to complete all the assignments; however, this means that one allowance is made for unusual circumstances which may prevent a student from completing an assignment. Late assignments will therefore not be accepted. The midterm examination will be held in class on Wednesday, March 11. The final exam will be during the final exams period, date TBA. The final course grade will be weighted as follows: written assignments (20%), midterm exam (30%), final exam (50%). READINGS Gruber, Jonathan. Public Finance and Public Policy. 3 rd edition. (required; available at the COOP) All of the non-textbook readings are available online. Readings are linked through the course website. Readings should be completed prior to the class for which they are assigned. 2

3 OVERVIEW OF LECTURES 1 Jan 26 Role of the Government in the Economy 2 Jan 28 Corruption 3 Feb 2 Public Goods 4 Feb 4 Fiscal Federalism I 5 Feb 9 Fiscal Federalism II 6 Feb 11 Introduction to Redistribution Assignment 1 due Feb 16 President s Day 7 Feb 18 Theory of Social Insurance 8 Feb 23 Health Insurance I 9 Feb 25 Health Insurance II 10 Mar 2 Unemployment Insurance 11 Mar 4 Informal Insurance Assignment 2 due 12 Mar 9 Retirement Systems 13 Mar 11 Midterm Examination Mar 16 Spring Break Mar 18 Spring Break 14 Mar 23 Design of Transfer Systems 15 Mar 25 Targeting 16 Mar 30 The Welfare State 17 Apr 1 Credit Constraints and Poverty Traps Assignment 3 due 18 Apr 6 Introduction to Taxation and Tax Incidence 19 Apr 8 Tax Inefficiencies and Optimal Taxation I 20 Apr 13 Tax Inefficiencies and Optimal Taxation II 21 Apr 15 Consumption Taxes Assignment 4 due 22 Apr 20 Tax Compliance and Evasion I 23 Apr 22 Tax Compliance and Evasion II 24 Apr 27 Public Sector Accountability I 25 Apr 29 Public Sector Accountability II Assignment 5 due 3

4 COURSE OUTLINE AND READINGS 1. Role of the Government in the Economy (Jan 26) Topics: Potential functions of a benevolent government; overview of non-benevolent models of government Gruber, chapter 1 Why Study Public Finance? Besley, Tim. The New Political Economy. Based on Keynes Lecture in Economics, Corruption (Jan 28) Topics: Costs and potential benefits of corruption; measuring corruption; cross-country and micro evidence Olken, Ben. Monitoring Corruption: Evidence from a Field Experiment in Indonesia, Journal of Political Economy, 2007, 115 (2), Public Goods (Feb 2) Topics: Optimal provision of public goods; private sector under-provision; crowd-out Gruber, chapter 7 Public Goods Andreoni, James. An Experimental Test of the Public-Goods Crowding-Out Hypothesis, American Economic Review, 1993, v83, Fiscal Federalism I (Feb 4) Topics: Overview of the facts; Tiebout model; Limits to Tiebout Gadenne, Lucie, and Monica Singhal. Decentralization in Developing Economies, Annual Review of Economics, 2014, 6: Gruber, chapter State and Local Government Expenditures 5. Fiscal Federalism II (Feb 9) Topics: Political economy considerations; the role of NGOs Ferraz, Claudio, and Frederico Finan. Exposing Corrupt Politicians: The Effects of Brazil s Publicly Released Audits on Electoral Outcomes, The Quarterly Journal of Economics, 2008, 123(2): Introduction to Redistribution (Feb 11) Topics: Motives for redistribution; Mirrlees model; the equity-efficiency tradeoff Gruber, chapter 2 Theoretical Tools of Public Finance 7. Theory of Social Insurance (Feb 18) Topics: Adverse selection; moral hazard; optimal social insurance Gruber, chapter 12 Social Insurance: The New Function of Government 4

5 Chetty, Raj. A General Formula for the Optimal Level of Social Insurance, Journal of Public Economics, 2006, 90, Health Insurance I (Feb 23) Topics: Health insurance in the U.S.; adverse selection; value of insurance Taubman et al. "Medicaid Increases Emergency Department Use: Evidence from Oregon's Health Insurance Experiment," Science, 2014, 343(6168): Baicker et al. "The Oregon Experiment Effects of Medicaid on Clinical Outcomes," New England Journal of Medicine, 2013, 368(18): Finkelstein et al. "The Oregon Health Insurance Experiment: Evidence from the First Year," Quarterly Journal of Economics, 2012, 127(3): Health Insurance II (Feb 25) Topics: Incentives in health insurance; the evolution of health care systems; the value of health spending Cutler, David. Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical-Care Reform, Journal of Economic Literature, September 2002, pp Unemployment Insurance (Mar 2) Topics: Moral hazard vs. risk reduction and match quality; unemployment insurance generosity and levels of unemployment Card, David, Raj Chetty and Andrea Weber. Cash on Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market, Quarterly Journal of Economics, 2007, 122(4), Informal Insurance (Mar 4) Topics: Theory of informal insurance; empirical evidence; interactions between formal and informal insurance Morduch, Jonathan. Income Smoothing and Consumption Smoothing, Journal of Economic Perspectives, Summer 1995, pp Chetty, Raj and Adam Looney. Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economies, Journal of Public Economics, 2006, 90, Retirement Systems (Mar 9) Topics: Types of public pension systems; effects on labor supply and savings; demographic issues; options for reform Gruber, Jonathan and David Wise, Social Security and Retirement: An International Comparison, The American Economic Review, 1998, 88(2), pp

6 Schieber, Sylvester J. and John B. Shoven. Social Security Reform: Around the World in 80 Ways, American Economic Review, Vol. 86, No. 2, 1996, pp Midterm Examination (Mar 11) 14. Design of Transfer Systems (Mar 23) Topics: Transfer programs and labor supply; in-kind and conditional cash transfers Rothstein, Jesse. "Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence," American Economic Journal: Economic Policy, 2010, 2(1): Gruber, chapter 17.3 Income Distribution and Welfare Programs 15. Targeting (Mar 25) Topics: Targeting transfers Albert L. Nichols and Richard J. Zeckhauser, Targeting Transfers through Restrictions on Recipients, American Economic Review, Vol. 72, No. 2, Papers and Proceedings of the Ninety-Fourth Annual Meeting of the American Economic Association (May, 1982), pp Alatas et al. Targeting the Poor: Evidence from a Field Experiment in Indonesia, American Economic Review, 2012, 102(4): The Welfare State (Mar 30) Topics: Causes and consequences of the modern welfare state Alesina, Alberto, Edward Glaeser, and Bruce Sacerdote. "Why Doesn't the United States Have a European-Style Welfare State?" Brookings Papers on Economic Activity , 2, pp Credit Constraints and Poverty Traps (Apr 1) Topics: Market failures and poverty; microfinance Ghosh, Parikshit, Dilip Mookherjee, and Debraj Ray. Credit Rationing in Developing Countries: An Overview of the Theory, Mimeo, Introduction to Taxation and Tax Incidence (Apr 6) Topics: Types of taxes; cross-country and historical overview; nominal and actual incidence; estimating incidence empirically Gruber, chapter Taxation in the United States and Around the World Gruber, chapter 19.1 The Equity Implications of Taxation: Tax Incidence Gruber, Jonathan. The Incidence of Payroll Taxation: Evidence from Chile, Journal of Labor Economics, v15(3), Part 2, S72-S101. 6

7 19. Tax Inefficiencies and Optimal Taxation I (Apr 8) Topics: Efficiency costs of taxation; optimal commodity taxation; optimal income taxation Gruber, chapter Tax Inefficiencies and their Implications for Optimal Taxation 20. Tax Inefficiencies and Optimal Taxation II (Apr 13) Topics: Estimating behavioral responses to taxation; evolution of empirical methods Creedy, John. The Elasticity of Taxable Income: A Non-Technical Summary, Mimeo, The University of Melbourne. Piketty, Thomas, Emmanuel Saez, and Stefanie Stantcheva. Taxing the 1%: Why the top tax rate could be over 80% Vox EU. Web. 8 Dec Consumption Taxes (Apr 15) Topics: Types of consumption taxes; consumption vs. income taxes; fundamental tax reform Gruber, chapter 25.4 Fundamental Tax Reform Ebrill et al., The Allure of the Value Added Tax, Finance and Development, Pomeranz, Dina. No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax. Working Paper Tax Compliance and Evasion I (Apr 20) Topics: Theoretical model of tax evasion; empirical evidence Allingham, Michael G. and Agnar Sandmo, Income Tax Evasion: A Theoretical Analysis, Journal of Public Economics, Vol 1., 1972, pp Carrillo, Paul, Dina Pomeranz, and Monica Singhal. Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement, Working Paper Tax Compliance and Evasion II (Apr 22) Topics: Tax compliance tradeoffs Best et al. Production vs Revenue Efficiency with Limited Tax Capacity: Theory and Evidence from Pakistan, (forthcoming) Journal of Political Economy. 24. Public Sector Accountability I (Apr 27) Topics: Corrupt officials; bribery Bertrand, Marianne, et al. Obtaining a Driver's License in India: An Experimental Approach to Studying Corruption, Quarterly Journal of Economics, 2007, 122(4):

8 Gorodnichenko, Yuriy and Klara Sabirianova, Public Sector Pay and Corruption: Measuring Bribery from Micro Data, Journal of Public Economics, 2007, 91, Public Sector Accountability II (Apr 29) Topics: Absenteeism; performance incentives Banerjee, Abhijit and Esther Duflo, Addressing Absence, Journal of Economic Perspectives, 2006, 20(1), Khan, Adnan Q., Asim I. Khwaja, and Benjamin A. Olken. Tax Farming Redux: Experimental Evidence on Performance Pay for Tax Collectors, Working Paper. 8