Dr Daniel Reck and Dr Johannes Spinnewijn

This course is available on the MPA Dual Degree (LSE and Columbia), MPA Dual Degree (LSE and Hertie), MPA Dual Degree (LSE and NUS), MPA Dual Degree (LSE and Sciences Po), MPA Dual Degree (LSE and Tokyo), Master of Public Administration and Master of Public Policy. This course is available with permission as an outside option to students on other programmes where regulations permit.

Students must have taken PP440 Macro and Microeconomics (for Public Policy) or an equivalent course.

This is a course in theoretical and applied public economics using intermediate economic theory. Topics include issues of equity and efficiency and alternative theories of the role of the state. Models of public goods and externalities, including environmental policy. Who really pays taxes: issues of tax incidence and tax evasion. Income inequality, poverty alleviation and the role of welfare programmes in theory and in practice. Health and education policy. The effects of taxes and transfers on labour supply and migration; The optimal taxation of commodities and incomes. Current topics in public finance. The main institutional references will be to the UK and the US, but some attention will also be given to broader international experience.

This course is delivered through a combination of classes and lectures totaling a minimum of 29 hours in the Lent Term, and a 1 hour of review class in the summer term. This year, some or all of this teaching may be delivered through a combination of virtual classes and flipped-lectures delivered as short online videos. This course includes a reading week in Week 6 of Lent Term.

Students will complete and be given feedback on two sets of practice questions, which are similar in style and format to the final examination.

J Gruber (2011) Public Finance and Public Policy, 3rd edition, Worth Publishers. [CC HJ141 G88] [or Gruber (2007), 2nd edition].

N Barr (2012), The Economics of the Welfare State, 5th ed., OUP [CC HB99.3 B26].  Institute for Fiscal Studies (2010-2011), Mirrlees Review: Reforming the Tax System for the 21st Century, Volume 1 (2010): Dimensions of Tax Design, Volume 2 (2011): Tax by Design. Oxford University Press, Oxford. Available online at: http://www.ifs.org.uk/mirrleesReview

On developments in public spending in the UK, see H Glennerster (2003), Understanding the finance of welfare (Policy Press); or H Glennerster and J Hills (eds) (1998), The State of Welfare: The economics of social spending (Oxford) [CC HV245 S79].

Students wishing to review their microeconomic theory should consult a textbook on intermediate microeconomic theory, such as Morgan, Katz and Rosen (2006) Microeconomics, McGraw Hill (CC HB172 M84) or J Perloff (2008) Microeconomics: Theory & applications with calculus, Pearson (CC HB172 P45).

On the structure of taxation in the UK, see IFS (2011) A Survey of the UK Tax System, Briefing Note no. 9 (http://www.ifs.org.uk/bns/bn09.pdf) and the HM Revenue and Customs website, (http://www.hmrc.gov.uk).  The Institute for Fiscal Studies is an independent policy research institute and its website (http://www.ifs.org.uk) has a wide range of useful publications. The HMRC website includes information on the tax structure and statistics on tax payments (by income group, by type of tax, etc.) and overall revenues raised.

The UK Treasury website (http://www.hm-treasury.gov.uk/) provides a range of documents on economic policies and the public finances, including the annual publication, Financial Statement and Budget Report (the ‘Red Book’), published each year on Budget Day.

For comparative international fiscal data, information and analysis, useful sources include the International Monetary Fund, IMF (http://www.imf.org/), the World Bank (http://www.worldbank.org/) and the Organisation for Economic Cooperation and Development, OECD  (http://www.oecd.org).

Exam (100%, duration: 3 hours, reading time: 15 minutes) in the summer exam period.