AØKA08035U Public Finance (p)
The teaching in this course may be changed to be taught either fully or partly online due to COVID-19. For further information, see the course room on Absalon. The time, place and type of assessment used for the exam may also be changed due to COVID-19, and any further information will be announced under the panel “Exam”.
The course introduces students to the 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.
A key aspect of Public Finance is the use of theoretical models to derive conditions for optimal policy that only depend on parameters that we can estimate using real data. During the course the students will see examples of this close link between theory and data at the lectures and in hands on exercises. They will learn to apply the achieved knowledge by analyzing and structuring academic discussions to the effects and optimality of policy initiatives. The students will also learn how to acquire additional knowledge about public policy issues through reading of scientific journal articles.
Topics and questions covered in the course include:
- Deadweight loss and excess burden: How do we measure the
efficiency cost of taxation and why is the size of the behavioral
responses to taxation important?
- Labor supply and taxes: In what way is the labor market
special in terms of outcomes and public policies? How do this
affect behavioral responses to taxation, efficiency and government
- Measurement of behavioral responses: How can empirical
methods be used to identify behavioral responses to government
policy? What are the key assumptions and how can we validate
- Tax evasion: How is tax evasion defined? What is the
level of tax evasion and what are the likely causes for it?
- Tax incidence: What determines who bears the “true cost”
of a tax? How it the distribution of the burden affected by
imperfect competition (as oppose to perfect competition).
- Taxation of firms: In what way is taxation of firms
special? How does this affect who bears the burden of taxation and
efficiency in the short and long run?
- Inequality and intergenerational mobility: How is
inequality measured? How has it evolved over time and how is it
transmitted between generations?
- Social welfare: What are the main arguments for
government intervention? How do we compare and choose between
different possible outcomes in society?
- Optimal income taxation: How big is the trade-off
between equality and efficiency? How high should the tax on high
- Social insurance: What is the difference between redistribution and social insurance? What is the optimal degree of social insurance (e.g. unemployment insurance) in society?
After completing the course the student is expected to be able to:
- Provide precise definitions of key concepts used in public finance when debating public policy (incidence, excess burden, intensive vs. extensive responses etc.).
- Account for motives for and against public sector involvement in the economy (redistribution, externalities, efficiency loss etc.)
- Define and discuss the theories and underlying assumptions behind key arguments about public policy (e.g. theory about tax incidence).
- Identify main empirical findings on the effects of public policy (e.g. introducing an earned income tax credit).
- Apply the empirical methods to analyze the effects of public policy (e.g. the difference-in-difference method)
- Assess the assumptions underlying the different methods (e.g. the common trend assumption).
- Analyze and engage in discussions about the effects and optimality of public policy initiatives by using the appropriate concepts, providing correct theoretical arguments and including relevant results from the empirical literature.
- Assess which empirical methods to use for analysing a policy problem
- Evaluate the strengths and weaknesses of different methods.
- Master the achieved knowledge and skills to structure and/or manage academic discussions about how to analyze the effects and optimality of new policy initiatives.
Hindriks, Jean and Gareth Myles (2013): “Intermediate Public Economics”, 2nd edition, MIT Press.
Various scientific journal articles and other readings.
Knowledge of empirical methods (cross sectional regression analysis) from the course Econometrics I.
(All courses offered at the Bachelor of Economics, University of Copenhagen)
The student may also benefit from courses in "Labor Economics" and "Applied Econometric Policy Evaluation" or similar course.
The lecturer offers office-hours. The lecturer informs when and where.
2 hours lectures 1 to 2 times a week from week 36 to 50 (except week 42).
The overall schema for the BA 3rd year and Master can be seen at KUnet:
MSc in Economics => "Courses and teaching" => "Planning and overview" => "Your timetable"
BA i Økonomi/KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"
Timetable and venue:
To see the time and location of lectures please press the link under "Timetable"/"Se skema" at the right side of this page. E means Autumn.
You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E20; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn – Weeks 31-4”
Press: “ View Timetable”
The Students can receive oral feedback on request during the two workshops.
The lecturer gives collective feedback on the workshop reports during the lectures.
For foreign students not enrolled: Admission requirements, registration etc: Study Economics.
For gæste- og enkelfagsstuderende: Tilmelding via Uddannelse i Økonomi.
- 7,5 ECTS
- Type of assessment
- Written assignment, 3 hoursThe exam assignment is given in English and must be answered in English.
Due to the Corona crisis, the Board of Study has decided to change the regular exams and the re-sit exams in the autumn semester to written online take-home exams. Both exams are still individual.
During the exam, it is not allowed to communicate with others about the exam assignment nor the solution at all. It is also prohibited to distribute data regarding the solutions to anyone. If this or alike actions happens, it will be regarded as cheating and plagiarism.
Please read more at
- Exam registration requirements
To qualify for the exam the student must during the semester and not later than the given deadlines:
- hand in and have approved two workshop reports.
The reports can be written individually or by groups of maximum three students. The plagiarism rules must be complied and please be aware of the rules for co-written assignments.
The reports must be written in English.
- All aids allowed
- Marking scale
- 7-point grading scale
- Censorship form
- No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
- Exam period
The exam takes place:
23 January 2021
The exact time will be available in Digital Exam.
In special cases, the exam date can be changed to another day and time within the exam period.
The written reexam takes place:
17 February 2021
Exact time will be available in the DE early February.
In special cases, the exam date can be changed to another day and time.
If only few students register for the reexam, it might change to a 20 minutes online oral examination with aids, but without preparation time.
If changed to an oral examination, the exam date, time and place may change as well. The Exam Office then informs the students.
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 with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.