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Economics of the public sector

Bibliographic Details
Main Author: Stiglitz, Joseph E
Other Authors: Rosengard, Jay K.
Format: Book
Language:English
Edition:4th edition
Subjects:
Finance, Public > United States
Fiscal policy > United States
Economics
Table of Contents:
  • Machine generated contents note: 1.Defining Public Sector Responsibilities
  • The Economic Role of Government
  • The Mixed Economy of the United States
  • Different Perspectives on the Role of Government
  • An Impetus for Government Action: Market Failures
  • Achieving Balance between the Public and Private Sectors
  • The Emerging Consensus
  • Thinking Like a Public Sector Economist
  • Analyzing the Public Sector
  • Economic Models
  • Case Study Musgrave's Three Branches
  • Normative versus Positive Economics
  • Disagreements among Economists
  • Differences in Views on How the Economy Behaves
  • Disagreement over Values
  • Case Study Public Sector Economics and the Global Economic Crisis
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 2.Measuring Public Sector Size
  • What or Who Is the Government?
  • Types of Government Activity
  • Providing a Legal System
  • Government Production
  • Government's Influence on Private Production
  • Note continued: Government Purchases of Goods and Services
  • Government Redistribution of Income
  • Overview of Government Expenditures
  • Gauging the Size of the Public Sector
  • Growth in Expenditures and Their Changing Composition
  • Case Study Estimating the Full Budgetary and Economic Costs of War
  • Comparison of Expenditures across Countries
  • Government Revenues
  • Taxes and the Constitution
  • Federal Taxation Today
  • State and Local Government Revenues
  • Comparison of Taxation across Countries
  • Deficit Financing
  • Playing Tricks with the Data on Government Activities
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 3.Market Efficiency
  • The Invisible Hand of Competitive Markets
  • Welfare Economics and Pareto Efficiency
  • Case Study On the Prowl for Pareto Improvements
  • Pareto Efficiency and Individualism
  • The Fundamental Theorems of Welfare Economics
  • Efficiency from the Perspective of a Single Market
  • Note continued: Analyzing Economic Efficiency
  • The Utility Possibilities Curve
  • Exchange Efficiency
  • Production Efficiency
  • Product Mix Efficiency
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 4.Market Failure
  • Property Rights and Contract Enforcement
  • Case Study Property Rights and Market Failures: The Tragedy of the Commons Revisited
  • Market Failures and the Role of Government
  • 1.Failure of Competition
  • 2.Public Goods
  • 3.Externalities
  • 4.Incomplete Markets
  • Case Study Student Loans: Incomplete Reform of an Incomplete Market
  • 5.Information Failures
  • 6.Unemployment, Inflation, and Disequilibrium
  • Interrelationships of Market Failures
  • Case Study Market Failures: Explanations or Excuses?
  • Redistribution and Merit Goods
  • Two Perspectives on the Role of Government
  • Normative Analysis
  • Positive Analysis
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Note continued: 5.Public Goods And Publicly Provided Private Goods
  • Public Goods
  • Public Goods and Market Failures
  • Paying for Public Goods
  • The Free Rider Problem
  • Case Study Economists and the Free Rider Problem
  • Pure and Impure Public Goods
  • Case Study Property Rights, Excludability, and Externalities
  • Publicly Provided Private Goods
  • Rationing Devices for Publicly Provided Private Goods
  • Efficiency Conditions for Public Goods
  • Demand Curves for Public Goods
  • Pareto Efficiency and Income Distribution
  • Limitations on Income Redistribution and the Efficient Supply of Public Goods
  • Distortionary Taxation and the Efficient Supply of Public Goods
  • Efficient Government as a Public Good
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Appendix: The Leftover Curve
  • 6.Externalities And The Environment
  • The Problem of Externalities
  • Private Solutions to Externalities
  • Internalizing Externalities
  • Note continued: The Coase Theorem
  • Using the Legal System
  • Case Study The Exxon Valdez Oil Spill
  • Failures of Private Solutions
  • Public Sector Solutions to Externalities
  • Case Study Double Dividend
  • Market-Based Solutions
  • Regulation
  • Innovation
  • Information Disclosure
  • Compensation and Distribution
  • Protecting the Environment: The Role of Government in Practice
  • Air
  • Water
  • Land
  • Concluding Remarks
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 7.Efficiency And Equity
  • Efficiency and Distribution Trade-Offs
  • Analyzing Social Choices
  • Determining the Trade-Offs
  • Evaluating the Trade-Offs
  • Two Caveats
  • Social Choices in Practice
  • Measuring Benefits
  • Ordinary and Compensated Demand Curves
  • Consumer Surplus
  • Measuring Aggregate Social Benefits
  • Measuring Inefficiency
  • Case Study Drawing a Poverty Line
  • Quantifying Distributional Effects
  • Case Study The Great Gatsby Curve
  • Note continued: Three Approaches to Social Choices
  • The Compensation Principle
  • Trade-Offs across Measures
  • Weighted Net Benefits
  • The Trade-Off between Efficiency and Fairness Revisited
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Appendix: Alternative Measures of Inequality
  • The Lorenz Curve
  • The Dalton-Atkinson Measure
  • 8.Public Production Of Goods And Services
  • Natural Monopoly: Public Production of Private Goods
  • The Basic Economics of Natural Monopoly
  • Regulation and Taxation (Subsidies)
  • No Government Intervention
  • Government Failures
  • Case Study Rent Control and Agricultural Price Supports: Case Studies in Government Failure
  • Comparison of Efficiency in the Public and Private Sectors
  • Case Study National Performance Review
  • Sources of Inefficiency in the Public Sector
  • Organizational Differences
  • Individual Differences
  • Bureaucratic Procedures and Risk Aversion
  • Corporatization
  • Note continued: Case Study Privatizing Prisons
  • A Growing Consensus on Government's Role in Production
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 9.Public Choice
  • Public Mechanisms for Allocating Resources
  • The Problem of Preference Revelation
  • Individual Preferences for Public Goods
  • The Problem of Aggregating Preferences
  • Majority Voting and the Voting Paradox
  • Arrow's Impossibility Theorem
  • Single-Peaked Preferences and the Existence of a Majority Voting Equilibrium
  • The Median Voter
  • The Inefficiency of the Majority Voting Equilibrium
  • The Two-Party System and the Median Voter
  • Case Study Social Choice Theory
  • Alternatives for Determining Public Goods Expenditures
  • Lindahl Equilibrium
  • Politics and Economics
  • Why Do Individuals Vote?
  • Elections and Special Interest Groups
  • The Power of Special Interest Groups
  • Other Aspects of the Political Process
  • Case Study Campaign Finance Reform
  • Note continued: The Altruistic Politician?
  • The Persistence of Inefficient Equilibrium
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Appendix: New Preference-Revelation Mechanisms
  • 10.Framework For Analysis Of Expenditure Policy
  • Need for a Program
  • Market Failures
  • Case Study Higher Education in the United States
  • Alternative Forms of Government Intervention
  • The Importance of Particular Design Features
  • Private Sector Responses to Government Programs
  • Efficiency Consequences
  • Income and Substitution Effects and Induced Inefficiency
  • Distributional Consequences
  • Evaluating the Distributional Consequences
  • Case Study Incidence of Education Tax Credits
  • Fairness and Distribution
  • Equity-Efficiency Trade-Offs
  • Public Policy Objectives
  • Political Process
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 11.Evaluating Public Expenditure
  • Private Cost-Benefit Analysis
  • Note continued: Present Discounted Value
  • Social Cost-Benefit Analysis
  • Consumer Surplus and the Decision to Undertake a Project
  • Measuring Nonmonetized Costs and Benefits
  • Valuing Time
  • Valuing Life
  • Case Study Children, Car Safety, and the Value of Life
  • Valuing Natural Resources
  • Shadow Prices and Market Prices
  • Discount Rate for Social Cost-Benefit Analysis
  • Case Study Climate Change and Discount Rates
  • The Evaluation of Risk
  • Risk Assessment
  • Distributional Considerations
  • Cost Effectiveness
  • Post-Expenditure Evaluation: Assessing and Improving Government Performance
  • Case Study Taking a Bite Out of Crime in the Big Apple
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 12.Defense, Research, And Technology
  • Defense Expenditures
  • The Value of Marginal Analysis
  • Defense Strategy
  • Case Study Game Theory, the Arms Race, and the Theory of Deterrence
  • Case Study Converting Swords into Plowshares
  • Note continued: Increasing the Efficiency of the Defense Department
  • Defense Procurement
  • Defense Conversion
  • Accounting and the Defense Department
  • Research and Technology
  • Market Failures
  • Case Study The Scope of the Patent: Can the Human Body Be Patented?
  • Government Direct Support
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 13.Health Care
  • The Health Care System in the United States
  • The Private Sector
  • The Role of Government
  • Other Expenditure Programs
  • Tax Expenditures
  • Rationale for a Role of Government in the Health Care Sector
  • Imperfect Information
  • Limited Competition
  • Absence of Profit Motive
  • Special Characteristics of the U.S. Market
  • The Role of the Health Insurance Industry
  • Case Study Medical Malpractice
  • Insurance and Excessive Expenditures on Health Care
  • Consequences of Inefficiencies in Health Care Markets
  • Poverty, Incomplete Coverage, and the Role of Government
  • Note continued: Reforming Health Care
  • Cost Containment
  • Case Study Comprehensive Health Care Reform
  • Extending Insurance Coverage
  • Medicare Reform: Easing Long-Term Fiscal Strains
  • Reforming Medicaid
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 14.Education
  • The Structure of Education in the United States
  • Federal Tax Subsidies to Private and Public Schools
  • Why Is Education Publicly Provided and Publicly Financed?
  • Is There a Market Failure?
  • The Federal Role
  • Issues and Controversies in Educational Policy
  • Education Outcomes
  • Do Expenditures Matter?
  • School Vouchers: Choice and Competition
  • Case Study Vouchers: The San Jose and Milwaukee Experiments
  • School Decentralization
  • Performance Standards: No Child Left Behind and Race to the Top
  • Inequality
  • Aid to Higher Education
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Note continued: Appendix: How Should Public Educational Funds Be Allocated?
  • 15.Welfare Programs And The Redistribution Of Income
  • A Brief Description of Major U.S. Welfare Programs
  • AFDC and TANF
  • Earned Income Tax Credit
  • Food Stamps/SNAP
  • Medicaid
  • Housing
  • Other Programs
  • Rationale for Government Welfare Programs
  • Dimensions of the Problem
  • Analytic Issues
  • Labor Supply
  • Cash versus In-Kind Redistribution
  • Inefficiencies from In-Kind Benefits
  • Are In-Kind Benefits Paternalistic?
  • Categorical versus Broad-Based Aid
  • Is Means Testing Objectionable in Its Own Right?
  • Other Distortions
  • Case Study Conditional Cash Transfer Programs
  • Welfare Reform: Integration of Programs
  • The Welfare Reform Bill of 1996
  • Block Granting
  • Analytics of State Responses to Block Grants
  • Time Limits
  • Mandatory Work
  • The Welfare Reform Debate of 1996
  • Case Study The Person or the Place?
  • Concluding Remarks
  • Review and Practice
  • Note continued: Summary
  • Key Concepts
  • Questions and Problems
  • 16.Social Insurance
  • The Social Security System
  • Social Security, Private Insurance, and Market Failures
  • High Transactions Costs
  • Risk Mitigation
  • Lack of Indexing: The Inability of Private Markets to Insure Social Risks
  • Adverse Selection, Differential Risks, and the Cost of Insurance
  • Moral Hazard and Social Security
  • Retirement Insurance as a Merit Good
  • Social Security, Forced Savings, and Individual Choice
  • Is There a Need to Reform Social Security?
  • The Nature of the Fiscal Crisis
  • Savings
  • Labor Supply
  • The Rate of Return
  • Inequities
  • Reforming Social Security
  • Reducing Expenditures
  • Increasing Revenues
  • Structural Reforms
  • Case Study Social Security Abroad
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 17.Introduction To Taxation
  • Background
  • Forms of Taxation
  • Changing Patterns of Taxation in the United States
  • Note continued: Comparisons with Other Countries
  • The Five Desirable Characteristics of Any Tax System
  • Economic Efficiency
  • Administrative Costs
  • Case Study Corrective Taxes and the Double Dividend
  • Flexibility
  • Transparent Political Responsibility
  • Fairness
  • Case Study Corruption-Resistant Tax Systems
  • General Framework for Choosing among Tax Systems
  • Utilitarianism
  • Rawlsian Social Welfare Function
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 18.Tax Incidence
  • Tax Incidence in Competitive Markets
  • Effect of Tax at the Level of a Firm
  • Impact on Market Equilibrium
  • Does It Matter Whether the Tax Is Levied on Consumers or on Producers?
  • Case Study The Incidence of Government Benefits
  • Ad Valorem versus Specific Taxes
  • The Effect of Elasticity
  • Taxation of Factors
  • Case Study The Philadelphia Wage Tax
  • Tax Incidence in Environments without Perfect Competition
  • Note continued: Relationship between the Change in the Price and the Tax
  • Ad Valorem versus Specific Taxes
  • Tax Incidence in Oligopolies
  • Equivalent Taxes
  • Income Tax and Value-Added Tax
  • Equivalence of Consumption and Wage Taxes
  • Equivalence of Lifetime Consumption and Lifetime Income Taxes
  • A Caveat on Equivalence
  • Other Factors Affecting Tax Incidence
  • Tax Incidence under Partial and General Equilibrium
  • Case Study Behavioral Economics, Managerial Capitalism, and Tax Incidence
  • Short-Run versus Long-Run Effects
  • Open versus Closed Economy
  • Associated Policy Changes
  • Case Study Tax Incidence of Specific Tax Provisions
  • Incidence of Taxes in the United States
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Appendix: Comparison of the Effects of an Ad Valorem and Specific Commodity Tax on a Monopolist
  • 19.Taxation And Economic Efficiency
  • Effect of Taxes Borne by Consumers
  • Note continued: Substitution and Income Effects
  • Quantifying the Distortions
  • Measuring Deadweight Loss Using Indifference Curves
  • Measuring Deadweight Loss Using Compensated Demand Curves
  • Calculating the Deadweight Loss
  • Effect of Taxes Borne by Producers
  • Effects of Taxes Borne Partly by Consumers, Partly by Producers
  • Taxation of Savings
  • Quantifying the Effects of an Interest Income Tax
  • Taxation of Labor Income
  • Effects of Progressive Taxation
  • Case Study The 1993, 2001, and 2003 Tax Reforms
  • Secondary Labor Force Participants
  • Measuring the Effects of Taxes on Labor Supplied
  • Statistical Techniques Using Market Data
  • Experiments
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Appendix: Measuring the Welfare Cost of User Fees
  • 20.Optimal Taxation
  • Two Fallacies of Optimal Taxation
  • The Fallacy of Counting Distortions
  • Misinterpretations of the Theory of the Second Best
  • Note continued: Optimal and Pareto Efficient Taxation
  • Lump-Sum Taxes
  • Why Impose Distortionary Taxes?
  • Case Study Estimating the Optimal Tax Rate
  • Case Study Rent Seeking, Inequality, and Optimal Taxation
  • Designing an Income Tax System
  • Why Does More Progressivity Imply More Deadweight Loss?
  • A Diagrammatic Analysis of the Deadweight Loss of Progressive Taxation
  • Choosing among Flat-Rate Tax Schedules
  • Case Study The
  • Tax Increase on Upper-Income Individuals: A Pareto Inefficient Tax?
  • General Equilibrium Effects
  • Case Study Flat-Rate Taxes Arrive on the Political Scene
  • Differential Taxation
  • Ramsey Taxes
  • Differential Commodity Taxes in Advanced Countries with Progressive Income Taxes
  • Interest Income Taxation and Commodity Taxation
  • Taxes on Producers
  • The Dependence of Optimal Tax Structure on the Set of Available Taxes
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • Note continued: Appendix A: Deriving Ramsey Taxes on Commodities
  • Appendix B: Derivation of Ramsey Formula for Linear Demand Schedule
  • 21.Taxation Of Capital
  • Should Capital Be Taxed?
  • Relationship among Consumption Taxes, a Wage Tax, and Exempting Capital Income from Taxation
  • Equity Issues
  • Efficiency Arguments
  • Administrative Problems
  • Effects on Savings and Investment
  • Effects of Reduced Savings in a Closed Economy
  • The Distinction between Savings and Investment
  • National Savings and Budget Neutrality
  • Effects of Reduced Savings in an Open Economy
  • Impact on Risk Taking
  • Why Capital Taxation with Full Loss Deductibility May Increase Risk Taking
  • Case Study Tax Incentives for Risk Taking
  • Why Capital Taxation May Reduce Risk Taking
  • Measuring Changes in Asset Values
  • Capital Gains
  • Case Study Equity and the Reduction in Capital Gains Taxes
  • Depreciation
  • Case Study Distortions from Depreciation
  • Neutral Taxation
  • Note continued: Inflation
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 22.The Personal Income Tax
  • Outline of the U.S. Income Tax
  • Legislated versus Actual Tax Rates
  • Case Study A Loophole in the Earned Income Tax Credit?
  • Other Taxes
  • Principles Behind the U.S. Income Tax
  • The Income-Based Principle and the Haig-Simons Definition
  • The Progressivity Principle
  • The Family-Based Principle
  • The Annual Measure of Income Principle
  • Practical Problems in Implementing an Income Tax System
  • Determining Income
  • Timing
  • Personal Deductions
  • Deductions versus Credits
  • Case Study Temporary Tax Changes
  • Special Treatment of Capital Income
  • Housing
  • Savings for Retirement
  • Interest on State and Municipal Bonds
  • Capital Gains
  • Concluding Remarks
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 23.The Corporation Income Tax
  • The Basic Features of the Corporation Income Tax
  • Note continued: The Incidence of the Corporation Income Tax and Its Effect on Efficiency
  • The Corporation Income Tax as a Tax on Income from Capital in the Corporate Sector
  • Shifting of the Corporate Tax in the Long Run
  • The Corporation Tax for a Firm without Borrowing Constraints
  • Incidence of the Corporation Income Tax with Credit-Constrained Firms
  • The Corporation Tax as a Tax on Monopoly Profits
  • Managerial Firms: An Alternative Perspective
  • Depreciation
  • Combined Effects of Individual and Corporate Income Tax
  • Distributing Funds: The Basic Principles
  • The Dividend Paradox
  • Mergers, Acquisitions, and Share Repurchases
  • Does the Corporate Tax Bias Firms toward Debt Finance?
  • Distortions in Organizational Form Arising because Some Firms Do Not Have Taxable Income
  • Are Corporations Tax Preferred?
  • Calculating Effective Tax Rates
  • The Corporation Tax as Economic Policy
  • Note continued: Case Study The Proposed Incremental Investment Tax Credit of 1993: An Idea before Its Time?
  • Taxation of Multinationals
  • Case Study Foreign Income and the Corporation Income Tax
  • Should There Be a Corporation Income Tax?
  • Why Is There a Corporate Income Tax at All?
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 24.A Student's Guide To Tax Avoidance
  • Principles of Tax Avoidance
  • Postponement of Taxes
  • Shifting and Tax Arbitrage
  • Case Study Shorting against the Box
  • Tax Shelters
  • Case Study The Economics of Tax Avoidance
  • Who Gains from Tax Shelters
  • Middle-Class Tax Shelters
  • Tax Reform and Tax Avoidance
  • The 1986 Tax Reform
  • Minimum Tax on Individuals
  • Subsequent Tax Acts
  • Equity, Efficiency, and Tax Reform
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 25.Reform Of The Tax System
  • Fairness
  • Horizontal Equity Issues
  • Vertical Equity
  • Efficiency
  • Note continued: Case Study Marginal Tax Rates and the 1986 Tax Reform
  • Base Broadening
  • Interaction of Fairness and Efficiency Concerns
  • Simplifying the Tax Code
  • Assessing Complexity
  • Increasing Compliance
  • Reducing Tax Avoidance
  • Reducing Administrative and Compliance Costs
  • Sources of Complexity
  • The 1986 Tax Reform
  • Transition Issues and the Politics of Tax Reform
  • Tax Reforms for the Twenty-First Century
  • Reforms within the Current Framework
  • Major New Reforms
  • Case Study Ordinary Income versus Capital Gains
  • Case Study IRAs and National Savings
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 26.Intergovernmental Fiscal Relations
  • The Division of Responsibilities
  • Other Interaction between the Federal Government and the State and Local Governments
  • The Size of Financial Transfers
  • Case Study Unfunded Mandates
  • Principles of Fiscal Federalism
  • National Public Goods versus Local Public Goods
  • Note continued: Case Study International Public Goods
  • Do Local Communities Provide Local Public Goods Efficiently?
  • Tiebout Hypothesis
  • Market Failures
  • Redistribution
  • Other Arguments for Local Provision
  • Production versus Finance
  • Effectiveness of Federal Categorical Aid to Local Communities
  • The Federal Tax System and Local Expenditures
  • Concluding Remarks
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 27.Subnational Taxes And Expenditures
  • Tax Incidence Applied to Local Public Finance
  • Local Capital Taxes
  • Property Tax
  • Case Study The U.S. Property Tax Revolt
  • Income, Wage, and Sales Taxes
  • Distortions
  • Limitations on the Ability to Redistribute Income
  • Rent Control
  • Capitalization
  • Incentives for Pension Schemes
  • Choice of Debt versus Tax Financing
  • Short-Run versus Long-Run Capitalization
  • Who Benefits From Local Public Goods? The Capitalization Hypothesis
  • Note continued: Absolute versus Relative Capitalization
  • The Use of Changes in Land Rents to Measure Benefits
  • Testing the Capitalization Hypothesis
  • Public Choice at the Local Level
  • Problems of Multijurisdictional Taxation
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems
  • 28.Fiscal Deficits And Government Debt
  • The U.S. Deficit Problem since the 1980s
  • Sources of the Deficit Problem
  • Factors Not Contributing to the Deficit Problem
  • Success in Taming the Deficit: The Experience of the 1990s
  • Case Study Measuring Budget Deficits: What's Large, What's Real, and What's Right?
  • Consequences of Government Deficits
  • How Deficits Affect Future Generations When the Economy Is at Full Employment
  • Alternative Perspectives on the Burden of the Debt
  • Case Study Austerity in a Recession: Expansionary or Contractionary?
  • Improving the Budgetary Process
  • Budget Enforcement Act and Scoring
  • Capital Budgets
  • Note continued: Other Strategies
  • The Long-Term Problem: Entitlements and the Aged
  • Review and Practice
  • Summary
  • Key Concepts
  • Questions and Problems.

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