Public sector economics

The course introduces students to applied microeconomics, covering theoretical as well as empirical methods in policy analysis. Starting from individual choice theory, the course develops an analytical framework to study scope and form of welfare optimal government interventions. Considering different policy topics (e.g., income redistribution, environmental regulation, pension plans) we will confront theoretically optimal with actual policies. The comparisons will illustrate the importance of political economy arguments for the understanding of policy implementations. The comparisons further serve as examples to discuss methods and pitfalls in the empirical evaluation of micro policies. The empirical analysis, in turn, will highlight the role of behavioural economics for a proper understanding of how agents respond to government interventions. Including insights from behavioural economics paves the way for new, ‘behavioral’ approaches to the designing of optimal policies.