Economic Policy

The subject of economic policy covers a vast field of research, both theoretical and empirical. The course aspires to cover a range of topics in both fields, primarily from a microeconomic perspective. The first part deals with the basic notions of welfare economics and explores the reasons why a market economy may fail to lead to socially desirable outcomes even under the assumption of perfectly competitive markets. The role of government intervention and various facets of economic policy are thus studied as (sometimes imperfect) reactions to a range of market failures.  Emphasis will also be given to the principles underlying the construction of social welfare functions, the notion of equity as a potential objective of government policy and the theories of social justice that provide the moral basis for redistribution.

The second part of the course focuses on tax policy, an area of particular importance especially in the current conjunction where growing fiscal imbalances are facing almost all developed countries. It covers the theory of optimal commodity taxation, optimal income taxation, basic elements in company taxation, corrective taxation and environmental policy and also discusses aspects of forms of non-compliance and tax evasion. The course explores the interplay between tax theory and tax policy, how optimal taxation theory can act as a guide to tax policy and discusses the extent to which the insights gained by theoretical results are indeed reflected in real tax policies.