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Syllabus ECONOMICS AND PUBLIC POLICY - 59716 Last update 14-09-2013 HU Credits: 4 Degree/Cycle: 2nd degree (Master) Responsible Department: Public Policy Academic year: 0 Semester: 1st Semester Teaching Languages: Hebrew Campus: Mt. Scopus Course/Module Coordinator: momi dahan Coordinator Email: momidahan@mscc.huji.ac.il Coordinator Office Hours: 16:00-16:45 Teaching Staff: Prof Momi Dahan page 1 / 7

Course/Module description: The course first shows that under certain conditions market economy lead to an efficient allocation of resources. Then we discuss the conditions under which market economy fail to generate an efficient allocation. Various types of government intervention to remedy those market failures are presented along side with the limitations of government involvement. The inequality as a prominent consideration for government intervention is also discussed. In the second part of the course we deal with taxes that are needed to finance government intervention. In particular, we study how to design an efficient and equitable tax system. For each and every economic policy question discussed, the presentation of an economic conceptual framework is followed by a description of the way and extent of government intervention in Israel and the developed world. Course/Module aims: The goal of this course is to provide an economic conceptual framework that enables us to discuss the effects of government intervention on the efficiency of resources allocation in a range of areas such as education, health and welfare. Learning outcomes - On successful completion of this module, students should be able to: Assess the impact of public policy on economic efficiency and inequality in various policy arenas such as education, health, welfare and taxes. Justify government intervention or inaction in the markets. Integrate economic considerations into policy analysis and in particular in policy papers that every student has to prepare on actual policy issue. Compare the desired public policy and the actual policy in Israel and developed countries from economic perspective. Examine critically economic publications that are circulated by government institutions, NGOs and international institutions. Attendance requirements(%): none Teaching arrangement and method of instruction: Lectures & tutorials Course/Module Content: Course contents page 2 / 7

Introduction: Tools for positive analysis Market efficiency Public Goods Externalities Moral hazard asymmetric information Pension Education Public choice Inequality Designing programs for combat poverty Tax Incidence Efficient Taxation Fair and efficient tax system Local Government Required Reading: Required readings The central book in this course is: Harvey Rosen & Ted Gayer, Public Finance, 9th Edition, McGraw Hill, International Edition. Introduction: Rosen and Gayer, Chapter 1 Tools for positive analysis Rosen and Gayer, Chapter 2 page 3 / 7

Market efficiency Rosen and Gayer, Chapter 3 Rosen and Gayer, Appendix Public Goods Rosen and Gayer, Chapter 4 Externalities Rosen and Gayer, Chapter 5 Moral hazard asymmetric information Rosen and Gayer, Chapter 11 and Chapter 8, pages 177-178 Pension Education Rosen and Gayer, Chapter 7 Public choice Rosen and Gayer Chapter 6 Inequality Rosen and Gayer, Chapter 12 Designing programs to combat poverty Rosen and Gayer, Chapter 13 Tax Incidence Rosen and Gayer, Chapter 14 Efficient Taxation Rosen and Gayer Chapter 15 Fair and efficient tax system Rosen and Gayer Chapter 16 Local Government Rosen and Gayer Chapter 22 Additional Reading Material: Additional readings page 4 / 7

Introduction: OECD Economic Outlook Economic Freedom of the World, Annual Report World Economic Forum, Global Competitiveness Report Tools for positive analysis Fershtman, Chaim and Gneezy, Uri, "Discrimination in a Segmented Society: An Experimental Approach" Quarterly Journal of Economics. February 2001; 116(1): 351-77. Angrist, Joshua and Lavy, Victor, "Using Maimonides Rule to Estimate the Effect of Class Size on Scholastic Achievement", Quarterly Journal of Economics, May 1999; 114(2): 533-75. Momi Dahan and Udi Nisan, "The Effect of Benefits Level on Take-up Rates: Evidence from a Natural Experiment" forthcoming in the International Tax and Public Finance Market efficiency Public Goods Palfrey, Thomas R., and Jeffrey E. Prisbrey. "Anomalous Behaviour in Public Goods Experiments: How Much and Why?" American Economic Review 87 (December 1997), pp. 829-46. Jorgenson, Dale. W, and Kum-Young Yun. "Investment Volume 3, Lifting the Burden: Tax Reform, the Cost of Capital, and US Economic Growth." Cambridge, MA: MIT Press, 2001 Externalities Eric D. Gould, B. Peter Pashigian and Canice Prendergast, "Contracts, Externalities and Incentives in Shopping Malls", Review of Economics and Statistics. Volume 87, Issue 3, August 2005. Moral hazard asymmetric information Meyer, Bruce D. "Lesson from the U.S. Unemployment Insurance Experiments." Journal of Economic Literature 33 (Mach 1995), pp 91-131. Pension Diamond Peter, "National Debt in a Neoclassical Growth Model", American Economic Review 55(5) December 1965: 1126-1150. Education Galor Oded. and Zeira Joseph., Income Distribution and Macroeconomics Review page 5 / 7

of Economic Studies, 60 (1), 1993, pp 35-53. Altonji, Joseph and Dunn, Thomas. "The Effects of Family Characteristics on the Return to Education", Review of Economics and Statistics, November 1996; 78(4): 692-704. Ben Bassat Avi and Momi Dahan, (2008) "Social Rights in the Constitution and in Practice", Journal of Comparative Economics. Volume 36, Issue 1, March 2008, pp103-119. Public choice Inequality Tobin, James. "On Limiting the Domain of Inequality." Journal of Law and Economics 13 (1970):263-77. Designing programs for combat poverty Tax Incidence Don Fullerton Gilbert E. Metcalf. "Tax Incidence", Handbook of Public Economics, Vol. IV, pp. 1787-1872. Efficient Taxation Fair and efficient tax system Momi Dahan and Michel Strawczynski, Optimal Income Taxation: An example with a U-Shaped Pattern of Optimal Marginal Tax Rates: Comment, American Economic Review Volume 90, No. 3, June 2000 Local Government Tiebout, Charles.(1956) "A Pure Theory of Local Expenditures." Journal of Political Economy 64: 416-24. Course/Module evaluation: End of year written/oral examination 70 % Presentation 0 % Participation in Tutorials 0 % Project work 0 % Assignments 30 % Reports 0 % Research project 0 % Quizzes 0 % page 6 / 7