This course analyzes how the public sector affects the economy through taxes, income transfers, and the provision of various goods. Public sector activities are analyzed from positive and normative perspective. Positive analysis uses the tools of political economics, while normative analysis presents alternative views about what is a good society.

The course consists of lectures, exercises, and independent reading of the course textbook. The course textbook is:

Hindriks J & Myles G D: Intermediate Public Economics, 2006, chapters 1-15.

All students are recommended to buy the textbook, and keep it with them in lectures.

Handouts:

1. Introduction

2. Some Basic Math

3. Behavioral Responses to Linear Wage Taxes

4. Capital Income Taxation and Savings

5. Tax Incidence

BONUS READING: Survey chapter The Political Economy of Conscription, forthcoming in The Handbook on the Political Economy of War, to be published by Edward Elgar Publishing. This is an example of applying tax incidence to understand political issues.

6. Normative Views of a Good Society

7. Normative Views on Taxation
BONUS READING RELATED TO CHAPTER 7: Two papers on military conscription, with relevance to the efficiency and equity aspects of the tax system: Political considerations (Published in the European Journal of Political Economy in 2007) Growth effects (Forthcoming in the Defense and Peace Economics)

8. Optimal Wage Taxation
Details on page 13

9. Political Economics

BONUS READING on empirical political economics: The attached paper presents a theoretical model of how voters react to electoral promises and implemented policies, as well as tests it empirically: Selfish and Prospective: Theory and Evidence of Pocketbook Voting .

RECOMMENDED OTHER COURSES. The following two new interesting courses are a good substitute to Advanced Public Economics:
Design of Tax Systems
Introduction to Political Economics