Public economics notes - Public Economics ECN 741 Roozbeh...

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Public Economics ECN 741 Roozbeh Hosseini This version: March 11, 2015
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Contents I Syllabus 3 II Lecture Notes 18
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Acknowledgements In preparing these notes I have benefited from: V.V. Chari and Larry Jone’s first year Macro lecture notes Chari, Narayana Kocherlakota and Mike Golosov’s lectures on Pub- lic Economics. These notes are prepared for the Public Economics course at the W.P. Carey School of Business at Arizona State University. They may contain errors. Please use with caution and do not circulate. Comments are welcome.
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Part I Syllabus
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ECN 741: Public Economics Fall 2010 TOPICS IN PUBLIC ECONOMICS Instructor: Roozbeh Hosseini ( ) Office: BAC 638 Phone: (480)-727-7933 Time and place of meeting: Wednesdays 8:35 AM - 11:35 AM, BA 390 Office hours: By appointment Introduction In this course we study macroeconomics approach to public finance and issues in dynamic optimaltaxation. Wefirstreviewbasicresultsinthe“Ramseyapproachtooptimaltaxation”. This approach studies the problem of choosing optimal taxes given that only distortionary tax instruments are available (typically linear taxes). In this approach, lump sum taxes are excluded and more importantly it is assumed that all activities of agents are observable. We next turn to the study of “Mirrleesian approach to optimal taxation”. This approach allows for arbitrary nonlinear taxes (including lump-sum). The key feature of Mirrleesian approach is that activities of individuals are unobservable. This imposes an endogenous restrictiononthesetoffiscalpolicyinstrumentsastheyshouldprovidethecorrectincentive for individuals to exert effort according to their (unobserved) abilities. Because of these features,Mirrleesianmodelsprovidearichenvironmentsuitabletostudyissueslike: efficient redistribution,inequalities,intergenerationalwealthtransfers,provisionofinsuranceoverlife cycle, etc. We use the technical tools we develop in the course to study the insurance market imperfec- tions and public vs. private provision of insurance. Requirements Students are expected to read the papers before the class and actively participate in class discussions. The papers that will be discussed in lectures are marked by ’ ’. Every student will choose a paper from the reading list and present it in class. Preference is given to the papers marked by ’ ’. In addition, each student will write a referee report on the paper that they present. I will also assign one or two computational assignments. The grade will be based on presentation, referee report and the computational assignments. 1
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ECN 741: Public Economics Fall 2010 Tentative Plan This is a very preliminary (and ambitious) plan for the course. 1 Lecture Topic Papers covered in class 1 Static Ramsey Chari-Kehoe(1999) 2-3 Dynamic Ramsey Chamley(1986), Judd(1985) Atkeson-Chari-Kehoe(1999) Erosa-Gervais (2002),Conesa-Kitao-Krueger (2008) Werning (2007) 4 Static Mirrlees Mirrlees(1971), Seade(1977) Saez(2001) 5-6 Inverse Euler Equation Golosov-Kocherlakota-Tsyvinski (2003) Grochulski-Kocherlakota (2007) Farhi-Werning (2008) 6 Long Run Properties Farhi-Werning (2007) 7-8
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