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ES20019: Public finance 1

Follow this link for further information on academic years Academic Year: 2013/4
Further information on owning departmentsOwning Department/School: Department of Economics
Further information on credits Credits: 6
Further information on unit levels Level: Intermediate (FHEQ level 5)
Further information on teaching periods Period: Semester 1
Further information on unit assessment Assessment: EX 100%
Further information on supplementary assessment Supplementary Assessment: ES20019 Resit Examination (where allowed by programme regulations)
Further information on requisites Requisites: Before taking this unit you must take ES10001 and take ES10005 and while taking this unit you must take ES20011
Further information on descriptions Description: Aims:

* To enable students to apply principles of microeconomics to analyse public finance theory.
* To enable students to understand policy issues in public finance.
* To enable students to assess policy issues with reference to criteria that is drawn from welfare economics.

Learning Outcomes:
At the end of the course unit students should be able to:
* Apply microeconomic theory rigorously to assess theoretical issues in public finance.
* Assess whether taxation performs well with reference to criteria drawn from welfare economics.
* Understand and evaluate policy debates in public finance.

The following are facilitated and assessed: Abstract reasoning; information synthesis; diagrammatic skills; writing skills; numeracy skills.

The first part of the course provides an introduction to welfare economics. Public finance analysis relies on the application of welfare economics. The introduction focuses on the concepts of: efficiency; second best theory; consumer surplus; welfare criteria; externalities and public goods. These concepts are introduced with reference to questions of why and how governments should design taxes, subsidies and expenditures. For example, how should tax policy be designed to correct externalities? The 'benefit principle' of tax to supply public goods is assessed. The 'ability to pay' principle of taxation is also discussed.
The theory of welfare economics theory is applied to consider the 'costs of taxation'. While taxpayers often equate the costs of tax with their tax payments, an application of consumer surplus theory sheds insight into estimates of the 'efficiency' costs of taxation.
The burden of taxation is considered with reference to analysis of tax incidence. While taxpayers often equate the burden of taxation with the 'legal incidence' of taxation, closer analysis of the way that taxes are shifted illustrates differences between the 'legal incidence' and the 'economic incidence' of taxation. An analysis of the neoclassical general equilibrium model sheds insight into problems that are faced when attempting to determine the incidence of a corporation tax.
This course unit considers the impact that tax exerts on the decision to supply work effort, to save and to take risks. It also considers the impact that 'tax expenditures' exert on incentives (e.g. the impact of tax relief on charitable giving).
The unit concludes with analysis of the way that tax policies might be designed to achieve both efficiency and equity. Literature on 'optimal taxation' is explained and discussed.
Key texts:
* Cullis, J. and Jones, P. Public Finance and Public Choice, third edition (Oxford University Press, 2009).
* Rosen, H .S. and Gayer, T. Public Finance, eighth edition (McGraw Hill, 2008).
* Hindricks, J. and Myles, G.D. Intermediate Public Economics (MIT Press, 2006).
Further information on programme availabilityProgramme availability:

ES20019 is Optional on the following programmes:

Department of Economics
  • UHES-AFB03 : BSc (hons) Economics (Full-time) - Year 2
  • UHES-AKB03 : BSc (hons) Economics (Full-time with Thick Sandwich Placement) - Year 2
  • UHES-AFB02 : BSc (hons) Economics and International Development (Full-time) - Year 2
  • UHES-AKB02 : BSc (hons) Economics and International Development (Full-time with Thick Sandwich Placement) - Year 2
  • UHES-AFB01 : BSc (hons) Economics and Politics (Full-time) - Year 2
  • UHES-AKB01 : BSc (hons) Economics and Politics (Full-time with Thick Sandwich Placement) - Year 2

* This unit catalogue is applicable for the 2013/4 academic year only. Students continuing their studies into 2014/15 and beyond should not assume that this unit will be available in future years in the format displayed here for 2013/14.
* Programmes and units are subject to change at any time, in accordance with normal University procedures.
* Availability of units will be subject to constraints such as staff availability, minimum and maximum group sizes, and timetabling factors as well as a student's ability to meet any pre-requisite rules.