AØKA08035U  Public Finance

Volume 2016/2017

BSc programme in Economics -prioritized elective at the 3.year 
MSc programme in Economics – elective course


The course introduces students to 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. Examples of questions addressed in the course are:

  • How large should governments be?
  • What are the main arguments for government intervention?
  • How do individuals and firms respond to government policies and why is it important?
  • How can empirical methods be used to identify behavioral responses to government policy?
  • What are the typical theoretical and empirical methods used in Public Finance and how are they used?
  • How large are tax distortions and how are they minimized?
  • How is tax distortions related to the degree of self-finance, which often appears in the public debate?
  • Who bears the “true cost” of a tax?
  • How is inequality measured?
  • How do we compare and choose between different possible
  • outcomes in society?
  • How big is the trade-off between equality and efficiency?
  • How high is the tax rate on the rich and how high should it be?
  • How big a problem is tax avoidance and tax evasion and what is the optimal strategy to fight it?
  • What is the optimal degree of social insurance in society?
  • What is the second-best optimal policy if constraints prevent
  • implementation of first-best policy?
  • How should public policy deal with the presence of
  • externalities?
  • What are the right and wrong policies to deal with the climate challenge?
  • What is the scope for fiscal stimulus policy during economic crisis?
Learning Outcome

After completing the course, the student should be able to:


  • provide precise definitions of key concepts used in public finance when debating public policy (tax pressure, excess burden, intensive vs. extensive responses etc.),
  • know about motives for and against public sector involvement in the economy (redistribution, externalities, efficiency loss etc.),
  • fully understand the theories and underlying assumptions behind key arguments about public policy (e.g. theory about tax incidence),
  • know about and understand the different empirical methods applied when analyzing the effects of public policy (e.g. the difference-in-difference method),
  • know about the assumptions underlying the different methods (e.g. the common trend assumption),
  • know about main empirical findings on the effects of public policy (e.g. introducing an earned income tax credit).



  • Analyse and engage in discussions about the effects and optimality of public policy initiatives by understanding and using the appropriate concepts,
  • providing correct theoretical arguments,
  • include relevant results from the empirical literature,
  • assess which empirical methods to use for analysing a policy problem,
  • discuss the strengths and weaknesses of different methods.



  • Bring into play the achieved knowledge in academic discussions about how to analyze the effects and optimality of new policy initiatives.
  • Acquire additional knowledge about public policy issues through reading of scientific journal articles and by following more advance courses in public finance.


Hindriks, Jean and Gareth Myles (2013): “Intermediate Public Economics”, 2nd edition, MIT Press.

Knowledge of basic economic principles at the first year level, micro economics at the second year level and empirical methods at the second year level.
Lectures including two workshop where students analyze a problem theoretically and practice on using empirical methods to identify relevant behavioral responses to public policy.
2 hours of lectures one to two times per week for 14 weeks,

Time and venue:
To see the time and location of lectures please press the link/links under "Se skema" (See schedule) at the right side of this page (17F means Spring 2017).

You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F17; [Name of course]”
-Select Report Type: List
-Select Period: "Forår/Spring – Week 4-29”
Press: “ View Timetable”
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
at the computers of the university. The exam assignment is given in English and can be answered in English or in Danish. Language must be chosen at the course or exam registration.
Exam registration requirements


Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
100 % censurship
Exam period

The exam takes place:

June 2, 2017

at Peter Bangs Vej 36. 2000 Frederiksberg http:/​/​pc-eksamen.ku.dk/​pc_exam The exact time of the exam will be informed in the Self-Service at KUnet.

For enrolled students more information about examination, rules etc. is available at the student intranet for Examination (English),student intranet for Examination (KA-Danish) and student intranet for Examination (BA-Danish).


The written re-exam takes place:

August 8, 2017

at Peter Bangs Vej 36. 2000 Frederiksberg http:/​/​pc-eksamen.ku.dk/​pc_exam The exact time of the exam will be informed in the Self-Service at KUnet.

If only a few students have registered for the re-exam, the exam might change to an oral exam including the date, time and place for the exam, which will be informed  by the Examination Office.

Criteria for exam assesment

Students are assessed on the extent to which they master the learning outcome for the course.

To receive the top grade, the student must be able to demonstrate in an excellent manner that he or she has acquired and can make use of the knowledge, skills and competencies listed in the learning outcomes with no or only a few minor weaknesses.

  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 161
  • Exam
  • 3
  • Total
  • 206