University of California, Davis
Department of Economics
Public Finance
ECN131, Winter 2008
TR 6:10-7:30p. Wellman 230
Office Hours: R 9-10a & 3-4p
Teaching Assistant:
Prof. Farshid Mojaver
SSH 1101, 754-8077
fmojaver@ucdavis.edu
Daehwan Kim,
SSH 118,
Session:
Sookim@ucdavis.edu
Office hours: TR 11-12
W 5:10-6 & 6:10-7p, Wellman 229
Course Goals: Two courses explore the role of government in the economy. ECN130 focuses on
the design and impact of government expenditure programs and cost-benefit analysis. ECN131 is
concerned with analyzing how government uses taxation and other methods to finance these
expenditures. Neither of these courses is a prerequisite for the other; however, they are designed
to present a complementary picture of the interrelationship between government and the
economy. The main objective is for you to emerge from this class better able to thoughtfully
participate in economic discussions of taxation and tax reform.
Prerequisites: ECN100 (or equivalent) is required for this class. This course relies extensively on
intermediate microeconomic theory, and students for whom this background is weak will be at a
significant disadvantage
Text: Public Finance and Public Policy by Jonathan Gruber [2007] Worth Publishes
Web Page: For copies of homework assignments and solutions see
http://www.econ.ucdavis.edu/faculty/fmojaver/ECN131/
Grading: The course grade will be based on two midterm exams, a comprehensive final Exam and
Homework. The final score will be computed as whichever of the following is highest:
(1) 10%HW
+
30% Mid1
+
30% Mid2
+
30% Final
(2) 10%HW
+
30% Mid1
+
60% Final
(3) 10%HW
+
+
30%Mid22
+
60% Final
The course grades are assigned on a curve. There will be no makeup exams.
Exams are scheduled for the following dates:
Midterm 1:
Thursday, January 31
Midterm 2:
Thursday, February 28
Final: Comprehensive
Wednesday, March 19 (8:30-10:30p Wellman 230)
Home works Assignments: There will be 7 homework assignments, designed to help you to get
a better understanding of the material and also to prepare you for the exams. These will be
collected in class (before lecture) and graded in the scale of 0 to 4 (4=excellent, 3=good, 2=below
average yet acceptable, 0= missing, late or unsatisfactory).
HW Due Dates: all on Tuesdays except for the last one.
HW1
JAN 15
HW2
JAN 22
HW3
JAN 29
HW4
FEB 12
HW5
FEB 19
HW6
FEB 26
HW7
MAR 13
Topics
I. Introduction: Issues, Tools and Measurement
Labor Supply and Behavioral Effects of Taxes
Empirical Tools of Public Finance
Reading Assignments
Gruber Ch 2
Gruber Ch 3
II. The structure of taxes in the US
Gruber Ch 18
Overview of types of taxes
Structure of individual income taxes in the US
Measuring the fairness of tax systems
Defining the tax base and the appropriate unit for taxation
III. Who Pays? (Tax Incidence)
The economics of tax incidence
Tax incidence extensions
General equilibrium analysis of tax incidence
Actual incidence of taxation in the U.S.
Gruber Ch 19
IV. Taxation and Efficiency
Elasticities and inefficiency
Deadweight loss and efficient tax systems
Optimal commodity taxes
Optimal Income taxes
Gruber Ch 20
V. Taxes on labor supply
Theory: How do taxes affect work behavior?
Measuring the effects of taxes on labor supply
Earned Income Tax Credit
Child Care Tax Credits
Gruber Ch 21
VI. Taxes on savings
Theory and evidence on taxes and savings
Retirement savings and taxes
Gruber Ch 22
VII. Taxes on risk taking and wealth
Gruber Ch 23
Theory and evidence on taxes, investment and wealth
Capital gains taxation
Estate taxes
Property Taxes
VIII. Corporate Taxes in the US
Details & Structure
Incidence of the corporate tax
Effects on Behavior
Gruber Ch 24
IV. Fundamental Tax Reform in the US
Gruber Ch 25