Department of Applied Economics

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Regular version of the site

Events

Apr 25 – Apr 26

7th Conference "Applied Econometrics"

All events

Publications

Book

Academic Star Wars: Excellence Initiatives in Global Perspective
In press

Yudkevich Maria, Altbach P. G., Salmi J.

Cambridge: MIT Press, 2023.

Article

The Impact of Carbon Tax and Research Subsidies on Economic Growth in Japan

Besstremyannaya G., Dasher R., Golovan S.

HSE Economic Journal. 2025. Vol. 29. No. 1. P. 72-102.

Book chapter

Science or industry: Improving the quality of the Russian higher education system

Panova A., Slepyh V.

In bk.: Vocation, Technology & Education. Vol. 1. Iss. 4. Shenzhen Polytechnic University, 2024.

Working paper

Living Standards in the USSR during the Interwar Period

Voskoboynikov I.

Economics/EC. WP BRP. Высшая школа экономики, 2023. No. 264.

All publications

109028, Moscow
Pokrovsky blvd. 11,
Room S-527
Phone: (495) 772-95-99 ext.27502, 27503, 27498

Administration

Department Head – Svetlana B. Avdasheva

Deputy Department Head – Liudmila S. Zasimova

Manager – Maxim Shevelev

Faculty of Economic Sciences

Department of Applied Economics

Delivered by:: Department of Applied Economics

Type:: Elective course

When:: 3 year, 1, 2 module

Instructor

Rakuta, Natalya

Full Syllabus Ask Question

Abstract

This course provides a basis for the economic analysis of public policy issues. It provides the analysis of the role of public sector in the economic system, its functions, management techniques, taxation, and the efficiency estimation of resources usage. The focus of the course is on the main parts of public finance: taxation and spending. It also examines issues related to the role of the state, public choice, management of public assets and liabilities, and fiscal federalism. It develops an analytical framework that facilitates the evaluation of public policy.

Learning Objectives

To develop analytical tools and their application to key policy issues relating to the spending, taxation and financial activities of the government.
To introduce students to the main models and analytical tools of Public Economics
To develop student’s ability to apply theoretical knowledge to the actual economic cases

Expected Learning Outcomes

Explain main functions of the government
Analyse market failures.
Know different approaches to social welfare
Know main theorem and theories of Public Choice
Explain the behavior of economic agents in political process
Analyse tax incidence and welfare loss
Analyse effects of taxation on labour supply
Explain the tendencies in government expenditures
Explain the role of social insurance and its types
Conduct cost-benefit analysis for government programmes
Know main ways to increase efficiency in Public Sector
Analyse functions of the government at different levels

Course Contents

Introduction to Public Economics
Introduction. Public Economics. Subject and methods. Government. Historical development. Measurements. Revenues and expenditures. Functions of the Public sector. The minimal state. Market failure. Redistribution.
Market Failures
The first and the second fundamental theorems of welfare economics. Pareto efficiency. Source of market failure: competition failure, incomplete markets, information failure, externalities, public goods. The theory of externalities. Coase theorem. Pigouvian taxation. The theory of public goods. Club goods and local public goods. Efficiency conditions for public goods. Mechanism design. Private provision of public goods. Second-best principle. Imperfect competition and government regulation. Welfare loss. Asymmetric information and government solutions.
Income, inequality and poverty
Pareto efficiency versus alternative criteria. Equity and efficiency. Social welfare functions. Alternative theories of the role of the state. Redistribution and its effects. Inequality and poverty.
Voting
Public mechanisms for allocating resources: problems of eliciting preferences and reconciling differing views. Voting. Majority voting: the median voter theory and the voting paradox. Arrow’s Impossibility Theorem.
Rent-seeking
Special interest groups. Rent-seeking behaviour. Controlling rent-seeking. Theory of bureaucracy. “Principal - agent” problem. Government failure.
Commodity taxation
Types of taxes. The five desirable characteristics of a tax system. Tax incidence in competitive and monopolised markets. DWL and price elasticity. Equivalent taxes. Achieving tax neutrality. Effects of globalisation. Optimal commodity taxation: the Ramsey rule.
Income taxation
Taxes and labour supply: taxes and the individual budget constraint; income and substitution effects; non-linearities due to progressive taxation. Taxation of capital. Taxes and savings. Distributional considerations. Modelling tax evasion. Policies to reduce tax evasion.
Theories of the public sector
The size of public expenditures. Wagner’s law, Baumol’s law, a political model, budget-setting, etc. Public provision versus public procurement. Efficiency of public expenditures. Cost-benefit analysis.
Social Insurance and Welfare Programs
Information problems and the market for insurance. The role of social insurance. The case of unemployment insurance. Health care. Retirement pensions: funded and "pay-as-you-go" state pensions. Efficiency: effects on savings and retirement decisions. Approaches to income support. Welfare programs, targeting and incentives .Means-testing. The contributory principle. Integrating taxes and benefits.
Cost-Benefit Analysis
Private cost-benefit analysis. NPV and IRR methods. Social cost-benefit analysis. Measuring non-monetized costs and benefits. Shadow prices and market prices. Discount rate for social cost-benefit analysis. The evaluation of risk.
Managing the Public Sector's Assets and Liabilities
Privatisation: efficiency and equity arguments about state intervention. Forms of intervention. Public versus private ownership. Competition and quasi-markets. Regulation. Managing public sector liabilities: issues in domestic and external debt management.
Multiple Jurisdictions
Fiscal federalism. Arguments for multi-level government. The division of responsibilities. Principles of fiscal federalism: club theory and local public goods, Tiebout hypothesis. Production versus finance. The incidence applied to local public finance. Fiscal competition: problems of multi-jurisdictional taxation; income distribution; inter-governmental transfers.

Assessment Elements

Midterm 1
Midterm 2
Final exam
The final exam will be held in a distant format
Group presentation 1
Group presentation 2
Essay 1
Essay 2
Class participation
Midterm 1
Midterm 2
Final exam
Group presentation 1
Group presentation 2
Essay 1
Essay 2
Class participation

Interim Assessment

Interim assessment (2 module)
0.09 * Class participation + 0.045 * Essay 1 + 0.045 * Essay 2 + 0.4 * Final exam + 0.03 * Group presentation 1 + 0.03 * Group presentation 2 + 0.18 * Midterm 1 + 0.18 * Midterm 2

Bibliography

Recommended Core Bibliography

Hindriks, J., & Myles, G. D. (2013). Intermediate Public Economics (Vol. Second edition). Cambridge, Massachusetts: The MIT Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=564828

Recommended Additional Bibliography

Arrow, K. J., & Lind, R. C. (1970). Uncertainty and the Evaluation of Public Investment Decisions. American Economic Review, 60(3), 364–378. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=bsu&AN=4510669
Economics of the welfare state, Barr, N., 2012

Public Economics