Public Finance (p)
The course introduces students to the main topics, concepts, theories, empirical methods and results in Public Finance. Public Finance deals with the role of government in the economy. It focuses on the relationship between the government and the market and tries to answer such questions as when should the government intervene, and what problems can arise due to government policy when governments operate under imperfect information and other imperfections. The course covers both positive and normative aspects of government policy regarding the expenditure side and, in particular, the financing side of the public sector.
A key aspect of Public Finance is the use of theoretical models to derive conditions for optimal policy that only depend on parameters that we can estimate using real data. During the course the students will see examples of this close link between theory and data at the lectures and in hands on exercises. They will learn to apply the achieved knowledge by analyzing and structuring academic discussions to the effects and optimality of policy initiatives. The students will also learn how to acquire additional knowledge about public policy issues through reading of scientific journal articles.
Topics and questions covered in the course include:
- Deadweight loss and excess burden: How do we measure the
efficiency cost of taxation and why is the size of the behavioral
responses to taxation important?
- Labor supply and taxes: In what way is the labor market
special in terms of outcomes and public policies? How do this
affect behavioral responses to taxation, efficiency and government
- Measurement of behavioral responses: How can empirical
methods be used to identify behavioral responses to government
policy? What are the key assumptions and how can we validate
- Tax evasion: How is tax evasion defined? What is the
level of tax evasion and what are the likely causes for it?
- Tax incidence: What determines who bears the “true cost”
of a tax? How it the distribution of the burden affected by
imperfect competition (as oppose to perfect competition).
- Taxation of firms: In what way is taxation of firms
special? How does this affect who bears the burden of taxation and
efficiency in the short and long run?
- Inequality and intergenerational mobility: How is
inequality measured? How has it evolved over time and how is it
transmitted between generations?
- Social welfare: What are the main arguments for
government intervention? How do we compare and choose between
different possible outcomes in society?
- Optimal income taxation: How big is the trade-off
between equality and efficiency? How high should the tax on high
- Social insurance: What is the difference between redistribution and social insurance? What is the optimal degree of social insurance (e.g. unemployment insurance) in society?
After completing the course the student is expected to be able to:
- Provide precise definitions of key concepts used in public finance when debating public policy (incidence, excess burden, intensive vs. extensive responses etc.).
- Account for motives for and against public sector involvement in the economy (redistribution, externalities, efficiency loss etc.)
- Define and discuss the theories and underlying assumptions behind key arguments about public policy (e.g. theory about tax incidence).
- Identify main empirical findings on the effects of public policy (e.g. introducing an earned income tax credit).
- Apply the empirical methods to analyze the effects of public policy (e.g. the difference-in-difference method)
- Assess the assumptions underlying the different methods (e.g. the common trend assumption).
- Analyze and engage in discussions about the effects and optimality of public policy initiatives by using the appropriate concepts, providing correct theoretical arguments and including relevant results from the empirical literature.
- Assess which empirical methods to use for analysing a policy problem
- Evaluate the strengths and weaknesses of different methods.
- Master the achieved knowledge and skills to structure and/or manage academic discussions about how to analyze the effects and optimality of new policy initiatives.
Teaching consists of lectures and two workshop, where students
analyze a problem theoretically and use empirical methods (hands
on) to identify relevant behavioral responses to public policy.
Changes to teaching methods due to a pandemic crisis:
The teaching in this course might be changed to either fully or partly online due to a pandemic crisis. If changes are implemented please read the study messages at KUnet or the announcements in the virtual course room on Absalon (for enrolled students).
Hindriks, Jean and Gareth Myles (2013): “Intermediate Public Economics”, 2nd edition, MIT Press.
Various scientific journal articles and other readings.
Knowledge of basic economic principles from the courses
"Principle of Economics A" and "Principle of
Economics B". Knowledge of micro economics (consumer
optimization using calculus, equivalent/compensating variation and
social welfare) from the courses "Microeconomics I" and
Knowledge of empirical methods (cross sectional regression analysis) and tools (Stata or equivalent) from the course "Econometrics I".
All courses offered at the Bachelor of Economics, University of Copenhagen (or from similar courses and subjects)
The student may also benefit from courses in "Labor Economics" and "Applied Econometric Policy Evaluation" offered at the Bachelor of Economics, University of Copenhagen or similar courses.
2 hours lectures 1 to 2 times a week from week 36 to 50 (except week 42).
The overall schema for the BA 3rd year and Master can be seen at KUnet:
MSc in Economics => "Courses and teaching" => "Planning and overview" => "Your timetable"
BA i Økonomi/KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"
Timetable and venue:
To see the time and location of lectures please press the link under "Timetable"/"Se skema" at the right side of this page (E means Autumn).
You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E22; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn”
Press: “ View Timetable”
Please be aware:
- The schedule of the lectures can change without the participants´ acceptance. If this occur, you can see the new schedule in your personal timetable at KUnet, in the app myUCPH and through the links in the right side of this course description and at the link above.
- It is the students´s own responsibility continuously throughout the study to stay informed about their study, their teaching, their schedule, their exams etc. through the curriculum of the study programme, the study pages at KUnet, student messages, the course description, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app etc.
The Students can receive oral feedback on request during the two workshops.
The lecturer gives collective feedback on the workshop reports during the lectures.
Office hours: The lecturer offers office-hours. The lecturer informs when and where.
- 7,5 ECTS
- Type of assessment
Written examination, 3 hours under invigilation
- Type of assessment details
- ITX-exam in the exam venues of the university.
The exam assignment is given in English and must be answered in English.
Changes to the exam due to a pandemic crisis:
In the event that restrictions from a pandemic crisis may affect the conduction of the ITX-exams, the written exam and the re-sit exam will change to a 3 hours take-home exam with all aids. The changes will be announced in study messages at KUnet and in Digital Exam.
The take-home exams will still be individual and it is not allowed to communicate with any one about the exam assignment nor the solution at all. It is also prohibited to distribute data and other information at all. If this or alike actions occur, it will be regarded as cheating and plagiarism.
No aids allowed at the written exams.
If the ITX-exam changes to a take-home exam due to a pandemic crisis, the written take-home exam is with all aids.
For further information about allowed aids for the re-examination. Please go to the section "Re-exam".
- Marking scale
- 7-point grading scale
- Censorship form
- No external censorship
for the written exam. The written ITX-exam may be chosen for external assessment by random sample.
An oral re-examination may be with external assessment.
Criteria for exam assessment
Students are assessed on the extent to which they master the learning outcome for the course.
In order to obtain the top grade “12”, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.
In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level of the knowledge, skills and competencies listed in the learning outcomes.
Single subject courses (day)
- Course number
- 7,5 ECTS
- Programme level
- Full Degree Master
- Go to 'Signup' for information about registration and enrollment.
Information about admission and tuition fee: Master and Exchange Programme, credit students and guest students (Open University)
- For teaching: Go to 'Remarks'.
- For exam and re-sits: Go to 'Exam'.
- Department of Economics, Study Council
- Department of Economics
- Faculty of Social Sciences
- Jakob Egholt Søgaard (3-6e69774469677372326f7932686f)
- Claus Thustrup Kreiner (3-67786f4469677372326f7932686f)
See "Course Coordinators"
Please read "Remarks" regarding the schedule of the teaching.
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