In real life, individuals and firms are constantly confronted with the influence of the government. Indeed, the public sector has become an enormous economic force in most developed countries. This course examines the role of government in the market from an economic perspective, posing question such as: What precisely is the role of the government and why does it intervene? Under what conditions does government intervention improve social welfare?

The course introduces concepts like public goods, externalities and missing markets. And since the supply process can be understood as a production unit, it focuses on the role of government decision-making (cost-benefit analysis, competition between political parties, voting rules, bureaucracy). We explore the effects of taxation on individual and firm behavior. Furthermore, we analyze different theories of public debt and deficits, and the discussion concerning the fiscal criteria related to the Economic and Monetary Union in Europe. We discuss different types of welfare states around the world and their main advantages and disadvantages. Special attention is given to education, health care and pensions. Finally, we study the theory of fiscal federalism, which questions how responsibilities for providing public goods and services should be shared between levels of government. 

 

Format
The first weekly meeting seeks to explain general ideas and give theoretical background. In the second meeting, students participate actively as they apply theory in assignments, discussions, experiments, and papers. In the week before the final exam, students present a final paper to the class.