After introducing the theory and methodology of public economics and reviewing the efficiency of the competitive equilibrium, the book presents a historical and theoretical overview of the public sector. It then discusses departures from efficiency, including imperfect competition and asymmetric information; issues in political economy, including rent-seeking (a topic often omitted from other texts); equity; taxation issues, including tax evasion and its consequences; fiscal federalism and tax competition among independent jurisdictions; and the intertemporal issues of social security and economic growth.
This text introduces the reader to the theory of public economics and the most significant results of the analysis, providing an overview of the current state of the field. It is accessible to anyone with a background of intermediate microeconomics and macroeconomics and can be used in advanced undergraduate as well as graduate courses. Although the mathematics has been kept to a minimum, the book remains analytical rather than discursive. Annotated suggestions for further reading and numerous exercises are included at the end of each chapter.
Endorsements 'Intermediate Public Economics sets a new standard as a comprehensive text in public economic theory for advanced undergraduates and beginning graduate students. It combines clear and concise coverage of traditional topics, such as public goods, the theory of taxation, and externalities, with engaging and up-to-date discussion of more specialized topics such as political economy, fiscal federalism, and the effect of taxation on economic growth.' -- James M. Poterba, Mitsui Professor of Economics, MIT 'Here, at last, is a text that methodically unites the traditional normative principles of public economics with the recent emphases on positive approaches to government behavior and on imperfect information as a source of both market and government failure. The material is accessible to students and gives a balanced and well-informed view of the field.' 'This is the textbook that public economists have been waiting for. Hindriks and Myles present an up-to-date look at the core material in public finance, welfare economics, and collective choice theory, and delve into a number of areas of recent research. Without sacrificing formal theory, the authors present the material in a way that is well motivated, policy-relevant, and a pleasure to read. Suitable for any senior undergraduate or first graduate course, this book merits serious consideration by every instructor in the field.' -- Michael Smart, Department of Economics, University of Toronto
Solutions Manual available.
TABLE OF CONTENTS: * Preface * I PUBLIC ECONOMICS AND ECONOMIC EFFICIENCY * 1 An Introduction to Public Economics * 1.1 Public Economics * 1.2 Methods * 1.3 Analyzing Policy * 1.4 Preview * 1.5 Scope * Further Reading * Exercises * 2 Equilibrium and Efficiency * 2.1 Introduction * 2.2 Economic Models * 2.3 Competitive Economies * 2.4 Efficiency of Competition * 2.5 Lump-Sum Taxation * 2.6 Discussion of Assumptions * 2.7 Summary * Further Reading * Exercises * II GOVERNMENT * 3 Public Sector Statistics * 3.1 Introduction * 3.2 Historical Development * 3.3 Composition of Expenditure * 3.4 Revenue * 3.5 Measuring the Government * 3.6 Conclusions * Further Reading * Exercises * 4 Theories of the Public Sector * 4.1 Introduction * 4.2 Justification for the Public Sector * 4.3 Public Sector Growth * 4.4 Excessive Government * 4.5 Conclusions * Further Reading * Exercises * III DEPARTURES FROM EFFICIENCY * 5 Public Goods * 5.1 Introduction * 5.2 Definitions * 5.3 Private Provision * 5.4 Efficient Provision * 5.5 Voting * 5.6 Personalized Prices * 5.7 Mechanism Design * 5.8 More on Private Provision * 5.9 Fund-Raising Campaigns * 5.10 Conclusions * Further Reading * Exercises * 6 Club Goods and Local Public Goods * 6.1 Introduction * 6.2 Definitions * 6.3 Single-Product Clubs * 6.4 Clubs and the Economy * 6.5 Local Public Goods * 6.6 The Tiebout Hypothesis * 6.7 Empirical Tests * 6.8 Conclusions * Further Reading * Exercises * 7 Externalities * 7.1 Introduction * 7.2 Externalities Defined * 7.3 Market Inefficiency * 7.4 Externality Examples * 7.5 Pigouvian Taxation * 7.6 Licenses * 7.7 Internalization * 7.8 The Coase Theorem * 7.9 Nonconvexity * 7.10 Conclusions * Further Reading * Exercises * 8 Imperfect Competition * 8.1 Introduction * 8.2 Concepts of Competition * 8.3 Market Structure * 8.4 Welfare * 8.5 Tax Incidence * 8.6 Specific and Ad valorem Taxation * 8.7 Regulation of Monopoly * 8.8 Regulation of Oligopoly * 8.9 Unions and Taxation * 8.10 Monopsony * 8.11 Conclusions * Further Reading * Exercises * 9 Asymmetric Information * 9.1 Introduction * 9.2 Hidden Knowledge and Hidden Action * 9.3 Actions or Knowledge? * 9.4 Market Unraveling * 9.5 Screening * 9.6 Signaling * 9.7 Moral Hazard (Hidden Action) * 9.8 Public Provision of Health Care * 9.9 Evidence * 9.10 Conclusions * Further Reading * Exercises * IV POLITICAL ECONOMY * 10 Voting * 10.1 Introduction * 10.2 Stability * 10.3 Impossibility * 10.4 Majority Rule * 10.5 Alternatives to Majority Rule * 10.6 The Paradox of Voting * 10.7 The 'Alabama' Paradox * 10.8 Conclusions * Further Reading * Exercises * 11 Rent-Seeking * 11.1 Introduction * 11.2 Definitions * 11.3 Rent-Seeking Games * 11.4 Social Cost of Monopoly * 11.5 Equilibrium Effects * 11.6 Government Policy * 11.7 Informative Lobbying * 11.8 Controlling Rent-Seeking * 11.9 Conclusions * Further Reading * Exercises * V EQUITY AND DISTRIBUTION * 12 Optimality and Comparability * 12.1 Introduction * 12.2 Social Optimality * 12.3 Lump-Sum Taxes * 12.4 Impossibility of Lump-Sum Taxes * 12.5 Non-Tax Redistribution * 12.6 Aspects of Pareto-Efficiency * 12.7 Social Welfare Functions * 12.8 The Impossibility * 12.9 Interpersonal Comparability * 12.10 Comparability and Social Welfare * 12.11 Conclusions * Further Reading * Exercises * 13 Inequality and Poverty * 13.1 Introduction * 13.2 Measuring Income * 13.3 Equivalence Scales * 13.4 Inequality Measurement * 13.5 Poverty * 13.6 Conclusions * Further Reading * Exercises * VI TAXATION * 14 Commodity Taxation * 14.1 Introduction * 14.2 Deadweight Loss * 14.3 Optimal Taxation * 14.4 Production Efficiency * 14.5 Tax Rules * 14.6 Equity Considerations * 14.7 Applications * 14.8 Efficient Taxation * 14.9 Public Sector Pricing * 14.10 Conclusions * Further Reading * Exercises * 15 Income Taxation * 15.1 Introduction * 15.2 Equity and Efficiency * 15.3 Taxation and Labor Supply * 15.4 Empirical Evidence * 15.5 Optimal Income Taxation * 15.6 Two Specializations * 15.7 Numerical Results * 15.8 Tax Mix: Separation Principle * 15.9 Voting over a Flat Tax * 15.10 Conclusions * Further Reading * Exercises * 16 Tax Evasion * 16.1 Introduction * 16.2 The Extent of Evasion * 16.3 The Evasion Decision * 16.4 Auditing and Punishment * 16.5 Evidence on Evasion * 16.6 Effect of Honesty * 16.7 Tax Compliance Game * 16.8 Compliance and Social Interaction * 16.9 Conclusions * Further Reading * Exercises * VII MULTIPLE JURISDICTIONS * 17 Fiscal Federalism * 17.1 Introduction * 17.2 Arguments for Multi-level Government * 17.3 Optimal Structure: Efficiency versus Stability * 17.4 Accountability * 17.5 Risk Sharing * 17.6 Evidence on Decentralization * 17.7 Conclusions * Further Reading * Exercises * 18 Fiscal Competition * 18.1 Introduction * 18.2 Tax Competition * 18.3 Income Distribution * 18.4 Intergovernmental Transfers * 18.5 Evidence * 18.6 Conclusions * Further Reading * Exercises * VIII ISSUES OF TIME * 19 Intertemporal Efficiency * 19.1 Introduction * 19.2 Overlapping Generations * 19.3 Equilibrium * 19.4 Optimality and Efficiency * 19.5 Testing Efficiency * 19.6 Conclusions * Further Reading * Exercises * 20 Social Security and Debt * 20.1 Introduction * 20.2 Types of System * 20.3 The Pensions Crisis * 20.4 The Simplest Program * 20.5 Social Security and Production * 20.6 Population Growth * 20.7 Sustaining a Program * 20.8 Ricardian Equivalence * 20.9 Social Security Reform * 20.10 Conclusions * Further Reading * Exercises * 21 Economic Growth * 21.1 Introduction * 21.2 Exogenous Growth * 21.3 Endogenous Growth * 21.4 Policy Reform * 21.5 Empirical Evidence * 21.6 Conclusions * Further Reading * Exercises