1. Topics in Public Economics Katarina Nordblom

2. Short about the course
Lectures and seminars Students take a large responsibility Mostly research articles Examination: Active part in learning activities

3. Lectures
Three lectures Content will help you in your assignments Also written exam September 28 Slides are part of the reading material Read assigned literature beforehand

4. Student seminars
There are five compulsory seminars in groups without teacher. Class divided in two or three groups. In the course guide you see in detail what to do before and during each seminar. Examination is to hand in (together) a summary of the discussion in accordance with the course guide. Everything is handed in via GUL.

5. Case seminars
For some topics, everyone reads a review article and some read, analyze, write and present a specific case during 3 seminars with the full class and teacher. Choose one case (On Wed, 1st and 2nd choice) Tax compliance 1. How important is income shifting as a tool of individual tax avoidance? 2. Why does tax evasion differ that much across countries? 3. How important is tax morale for tax compliance? 4. How should countries tax corporations when there are tax havens?

6. Case seminars
Fiscal competition 5. Is there fiscal competition between Swedish municipalities with respect to taxes and local spending? 6. How can local jurisdictions use spending as a competitive tool? 7. Will we see a race to the bottom when it comes to corporate taxes in the EU? 8. What consequences may there be from globalization on domestic taxation of income and/or consumption?

7. Case seminars
Public spending 9. What public expenditures are most important for redistribution? 10. In what way does the equity/efficiency tradeoff matter in public spending? 11. Primary education is publicly provided in almost all countries, while tertiary education is sometimes private and sometimes public. Why is that so? 12. What is most effective – cash or in-kind transfers?

8. Tax system / Public sector
The largest assignment during the course
Choose a country today (1st and 2nd choice)
Sept. 5: Give a 5 min presentation and hand in 2 pages that everyone reads
September 7: Give one question to each of the others
September 22: Discuss an updated version in your group
September 28: 15 min presentation and hand in 4-6 pages

9. Day
Date
Time
Function
Description of learning activities, topics and assignments
Submit =>Deadline
Mon
28/8
10-12
Lecture 1
Course introduction. Presentation of learning activities and instructions for assignments.
Intro to Public Economics
Choice of country => 19.00
Tue
29/8
Wed
30/8
Lecture 2
Income taxation/ Elasticity of taxable income
Thu
31/8
Choice of case => 19.00
Fri
1/9
Student seminar 1
Welfare theory
Discussion summary (by group) => 19.00
5/9
Sem.with teacher
Present tax system/public sector
First draft on tax system/public sector (individually) => 10.00
6/9
Questions for the others (individually) => 19.00
7/9
Student seminar 2
Consumption taxation
8/9
Lecture 3
Redistribution
11/9
12/9
Student seminar 3
Discussion summary (by group) => 19.00
13/9
14/9
Student seminar 4
Taxation in Scandinavia and developing countries
18/9
19/9
Case Seminar 1
Tax compliance
20/9
Case Seminar 2
Fiscal competition
21/9
Case Seminar 3
Public spending
22/9
Student seminar 5
Discuss updated version of tax system/public sector
25/9
26/9
Case paper => 19.00
27/9
28/9
9-17
Examination
Written exam, then individual presentations of tax system/public sector
Final version of tax system/public sector => 9.00

10. Grades

11. Introducing Public Economics

12. Why public economics? Why a public sector?
Public economics different from market economics
Where we have externalities or want public goods, we know that the market solutions would be inefficient.
In markets where there is a natural monopoly there would be welfare losses if production was made by a profit maximizing monopolist.
In public economics we encounter other things than personal utilty or profit maximization.

13. Redistribution Redistribution is made in different ways:
Tax/transfer systems
Public provision of goods and services
Efficiency considerations
Equity considerations
How do we value the effects for different individuals/households?

14. Welfare theory
You have learnt that we strive for efficiency, Pareto efficiency. However, there are infinitely many Pareto efficient allocations and we need some tools to rank them. SWF can be used to rank allocations (like society’s utility function) During your first seminar you will discuss the concepts of welfare theory and what should constitute a SWF. Often we end up with an equity/efficiency trade-off when we are to choose among allocations. The SWF states the relative importance of equity and efficiency. The choice of SWF is both filosophical and ideological.

15. Taxation
The tasks of the public sector cost money, so governments need to raise revunue by taxation. If we only want to raise revenue with as little distortion as possible, we would simply use LUMP-SUM TAXATION which causes zero distortion (Taxes altering people’s and firm’s behavior are distortionary.) We could think of a tax where all citizens pay a certain (the same?) amount. Would that be feasible?

16. Taxation
A lump-sum tax would be efficient, but many would regard it as unfair if everyone paid the same amount. None that I know of has lump-sum taxation today. Any other tax is distortive. If the tax base is income, consumption, wealth etc., we could alter the tax base as a consequence of the tax and therefore our choices become distorted. Often a tax is more distortive, the more redistributive it is, thus the equity/efficience trade-off. What makes a tax a good tax?

17. Simple example of taxation