Public Economics Syllabus

Introduction
“Public finance is the study of the role of the government in the economy.”(Gruber) Government
collect tax and spend it. Why? We can consider two traditional roles of government: 1) provision of
public goods and 2) redistribution. Market mechanism is believed to be not so successful in providing
the proper level of public goods. Market outcome is also believed to be efficient in some senses, but
equity is not guaranteed in it. We will consider government expenditure programs serving these two
purposes.
To fund these programs, tax revenue should be collected. The effect of the tax and the efficient way of
imposing it will be considered in the sequel unit: Theory of Taxation.

We will mainly focus on microeconomic analysis. The discussion on the actual government programme
will complement the theoretical analysis. First and second year levels of microeconomics are
prerequisite. It is also recommended that students are equipped with mathematical skills taught in
math for economists.

This course is not only about theoretical analysis of the abstract expenditure programs, but also about
specific institutions and policy debates in Korea. Some of the supplementary materials are written in
Korean. You should be able to read and understand Korean for those discussions.

Instructor/ Office Hours

Sam-Ho Lee, Professor

PSE 427
Tel: 3290-2206
Email: samho@korea.ac.kr
Office Hours: TBA

Recommended/required text(s)
I will usually follow the discussion of
Harvery S. Rosen and Ted Gayer, Public Finance, 10th edition, McGraw Hill.

You can refer the following books, too.

Joanthan Gruber, 2011, Public Finance and Public Policy, 3rd edition, Worth.
Joseph Stiglitz, 2000, Economics of the Public Sector, 3rd edition, Norton.
이준구, 2011, 재정학, 다산출판사 (제 4 판)

However, discussions of Korean institutions are very limited in textbooks. For those subjects, we will
depend on some newspaper articles and supplementary materials including
재정경제수첩, 국회예산정책처.
Unit content
The following topics will be covered in the order listed below.

1. Introduction
A. Structure of government finance
B. Fundamental theorem of welfare economics
2. Government Expenditure 1: Provision of (Public) Goods and Service
A. Public goods and Publicly Provided Private Goods
B. Public Choice and Political Economy
C. Cost-Benefit Analysis
3. Some Government Programs
A. Externalities and Environmental Policies
B. Education
4. Government Expenditure II: Social Insurance and Redistribution
A. Health Insurance (국민건강보험)
B. National Pension (국민연금)
C. Income distribution and Public Assistance (기초생활보장제도, 근로장려세제)

ASSESSMENT
Summary

Item Weight Due date Remarks

Attendance 5% Attendance will be randomly checked.

Problem Sets 15% TBA There will be several problem sets.

Mid semester exam 35% Held in week 8

Final exam 45% Held in week 16 .

Note : Results may be subject to scaling and standardisation and are not necessarily the sum of
the component parts.

Assessment components
Attendance
Attendance will be randomly checked and every absent class will be counted as -1 in the final
numeric grade.

Problem Sets
There will be several problem sets

Midterm exam
 1 hour exam;
Final exam
 1 hour 15 min exam;
 Cumulative Coverage – all materials discussed in the unit will be covered.