Aaron YelowitzApplied economist · University of Kentucky
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ECO 752 · Fall 2019

Advanced Topics in Public Finance

Historical syllabus; policies and dates reflect this term.

Archived syllabus. Policies, dates, assignments, and readings reflect Fall 2019.

Course information

Economics 752-001: Advanced Topics in Public Finance University of Kentucky Fall Semester 2019

  1. 0 Credits TR/9:30 am – 10:45 am/B&E 230

Instructor Information

Professor Aaron Yelowitz Office: 225H Business & Economics Building Email: aaron@uky.edu Office hours: TR, 12:30 pm – 1:30 pm, and by appointment.

Course Description

This course examines economic approaches to policy analysis. Included is an analysis of the major concepts of economic analysis and their application to a number of policy problems.

Course Prerequisites

Prereq: PA 652 and PA 750 or equivalent and Ph.D. program status or consent of the instructor.

Student Learning Outcomes

After completing this course, the student will be able to:

  1. Identify the major features of the from various government policies in the United States.
  2. Contrast how markets would operate with different government policies in effect.
  3. Apply data to examine how individuals and firms respond to government policy.
  4. Analyze whether empirical findings from data application are consistent with theory.
  5. Integrate economic theory and empirical analysis to understand government policy.
  6. Assess whether policy proposals will have the intended consequences.

Required Materials

  1. Readings: Peer-reviewed articles – available on JSTOR for UK subscribers – will form the core readings of this course. Some articles come from the Handbook of Public Economics (HPE), and are typically available on NBER’s website.
  2. In addition, we will rely on an undergraduate textbook (Public Finance and Public Policy, Jonathan Gruber) for broad motivation of the topics.

Activities and Assignments

Course Assignments

  • Research Paper
  • Final Exam
  • In-Class Presentation

Summary Description of Course Assignments

  1. 50 points: All students will use publicly-available data of their choosing (i.e., HCUP, BRFSS, NHIS, NIS, CPS, ACS, SIPP, PSID, NLSY, GSS, NSAF, HRS, AHEAD, Vital Statistics, Census PUMS, Google Trends, etc.) to ask and answer a research question related to public economics. Much of this data can be found on NBER, Census, ICPRS, or data.gov.

Students will provide data, programs, log files and write-up in electronic form. All programming must be done in Stata and write-up must be in Word. The write-up must not exceed 2000 words (approximately 12 manuscript pages), including diagrams, figures, tables and references. The word count will be strictly enforced, and the overall goal is to have a paper that conforms to the guidelines from Economics Letters. See https://www.elsevier.com/wps/find/journaldescription.cws_home/505574?generatepdf=true.

Your research paper proposal will be due by 10/1/2019, by 4 pm EST. I will give you feedback by 10/8/2017. The research paper (and programs, log files, data) will be due on 11/26/2019, by 4 pm EST (prior to Thanksgiving).

  1. 35 points: There will be an in-class final exam during final exam week, on Monday, 12/16/2019 from 10:30 am – 12:30 pm. The exam will be closed book.
  2. 15 points: The field of public economics is vast and the goal of the in-class presentation is to teach the entire class about an unexplored aspect of public economics. Several recent winners of the John Bates Clark medal have made recent, important contributions to the field. The presentations will be around 15 minutes each (with questions), and will take the final two class sessions (12/10/2019, 12/12/20-19). You must have the topic approved by me. The topics should focus on timely issues in public economics. Presentation proposals will be due in class by 11/5/2019, by 4 pm EST.

Submission of Assignments

The final exam (and presentation) will be held in class. You will turn it in during class session. You may use a calculator on the quiz or exam, but not a cellphone or other device. For students with a documented, excused absence, an alternative quiz or exam will be administered at a mutually agreeable time and location.

Course Grading

A grading curve will be applied; historically in classes similar to this, approximately 70% of students earn an A; 30% earn a B or lower.

Attendance Policy

Students are strongly encouraged to attend every class session; however, attendance itself does not count toward the grade in the class. Many of the academic readings will be easier to understand with class attendance.

Course Topics / Outline / Readings

  1. Empirical Tools of Public Finance
  • Gruber textbook, Chapter 3
  • Difference-in-difference handout
  • Bertrand, Duflo, and Mullainathan, “How Much Should We Trust Differences-in-Differences Estimates?” QJE, 119(1), February 2004, 249-75.
  1. Externalities in Action: Environmental and Health Externalities
  • Gruber textbook, Chapter 6.3 & 6.4
  • Evans, Farelly, and Montgomery, “Do Workplace Smoking Bans Reduce Smoking?” AER, 89(4), September 1999, 728–47.
  • Fullerton and Kinnaman, “Household Responses to Pricing Garbage by the Bag,” AER, 86(4), September 1996, 971-84.
  • Ayres and Levitt, “Measuring Positive Externalities From Unobservable Victim Precaution: An Empirical Analysis of LoJack,” QJE, 113(1), February 1998, 43-77.
  • Homonoff, “Can Small Incentives Have Large Effects? The Impact of Taxes versus Bonuses on Disposable Bag Use,” AEJ: Economic Policy, 10(4), November 2018, 177-210.
  1. Education
  • Gruber textbook, Chapter 11
  1. 1 Vouchers
  • Rouse, “Private School Vouchers and Student Achievement: An Evaluation of the Milwaukee Parental Choice Program.” QJE 113 (May 1998): 553–602.
  1. 2 Returns to education
  • Tyler, Murnane, and Willett. “Estimating the Labor Market Signaling Value of the GED.” QJE 115 (May 2000): 431–68.
  • Jaeger and Page. “Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education.” ReStat 78 (November 1996): 733–40.
  • Jepsen, Mueser, and Troske, 2016. “Labor Market Returns to the GED Using Regression Discontinuity Analysis,” JPE, 124(3): 621-649
  1. 3 School quality
  • Chetty, Friedman, Hilger, Saez, Schanzenbach and Yagan, “How Does Your Kindergarten Classroom Affect Your Earnings? Evidence From Project STAR,” QJE, 126(4), November 2011, 1593-1660.
  1. 4 High Stakes Testing
  • Jacob and Levitt, “Rotten Apples: An Investigation of the Prevalence and Predictors of Teacher Cheating,” QJE, 118(3), August 2003, 843-877.
  • Jacob and Levitt, “Catching Cheating Teachers: The Results of an Unusual Experiment in Implementing Theory,” Brookings-Wharton Papers on Urban Affairs, 2003, 185-220. Also, comments by Philip J. Cook and Bruce Sacerdote.
  1. 5 Charter Schools
  • Dobbie and Fryer Jr., “The Medium-Term Impacts of High-Achieving Charter Schools,” JPE 123 (5), October 2015, 985-1037.
  • Fryer, Jr., “Injecting Charter School Best Practices into Traditional Public Schools: Evidence from Field Experiments,” QJE 129(3), August 2014, 1355–1407.
  • Dobbie and Fryer Jr. 2013. “Getting beneath the Veil of Effective Schools: Evidence from New York City.” AEJ: Applied Economics, 5(4): 28-60.
  1. Social Insurance: The New Function of Government
  • Gruber, Chapter 12
  • Finkelstein and McGarry, “Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market,” AER, 96(4), 2006, 938-958.
  • Cutler and Reber. “Paying for Health Insurance:The Trade-off between Competition and Adverse Selection.” QJE 113 (May 1998): 433–66.
  • Buchmueller and DiNardo, “Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut,” AER, March 2002, 92(1): 280-94.
  • Harris, T. and Yelowitz, A., “Is There Adverse Selection in the Life Insurance Market? Evidence from a Representative Sample of Purchasers,” Economics Letters, September 2014, 124(3): 520-522.
  1. Social Security and Saving Behavior
  • Gruber, Chapter 13
  • Finkelstein and Poterba. “Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market.” JPE 112(1, Part 1), February 2004, 183–208.
  • Madrian and Shea, “The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior,” QJE, 116(4), November 2001, 1149-1187.
  • Raj Chetty, John N. Friedman, Søren Leth-Petersen, Torben Heien Nielsen, Tore Olsen. “Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark,” QJE 129(3) August 2014, 1141–1219.
  • Harris, T., Troske, K., and Yelowitz, A. “How Will State-Run Auto-IRAs Affect Workers?” The Journal of Retirement, Fall 2018, 6(2): 27-33.
  1. Unemployment Insurance, Disability Insurance, and Workers’ Compensation
  • Gruber, Chapter 14
  • Bound, “The Health and Earnings of Rejected Disability Insurance Applicants,” AER, 79(3), June 1989, 482-503.
  • Parsons “The Health and Earnings of Rejected Disability Insurance Applicants: Comment” AER, 81(5), December 1991, 1419-26.
  • Bound “The Health and Earnings of Rejected Disability Insurance Applicants: Reply” AER, 81(5), December 1991, 1427-34.
  • Gruber, “The Consumption Smoothing Benefits of Unemployment Insurance,” AER, March 1997, 192- 205.
  • Meyer, “Unemployment Insurance and Unemployment Spells,” Econometrica 58(4), July 1990, 757– 82.
  • Krueger, “Incentive Effects of Workers’ Compensation Insurance,” JPubE 41 (1), February 1990, 73– 99.
  1. Health Insurance I: Health Economics and Private Health Insurance
  • Gruber, Chapter 15
  • Madrian, “Employment-Based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?” QJE 109 (February 1994): 27–54.
  • Manning, Newhouse, Duan, Keeler, and Liebowitz, “Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment,” AER, 77(3), June 1987, 251-77.
  • Aron-Dine, Einva, and Finkelstein, “The RAND Health Insurance Experiment, Three Decades Later,” JEP, 27(1), Winter 2013, 197-222.
  • Finkelstein, et al, “The Oregon Health Insurance Experiment: Evidence from the First Year,” QJE, 127(3), August 2012, 1057-1106.
  1. Health Insurance II: Medicare, Medicaid, and Health Care Reform
  • Gruber, Chapter 16
  • Cutler and Gruber. “Does Public Insurance Crowd Out Private Insurance?” QJE 111 (May 1996): 391–430.
  • Gruber, “The Incidence of Mandated Maternity Benefits.” AER 84 (June 1994): 86–102.
  • Summers, “Some Simple Economics of Mandated Benefits.” AER 79 (May 1989): 177–83.
  • Currie and Gruber, “Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women.” JPE 104 (December 1996a): 1263–96.
  • Gruber and Yelowitz, “Public Health Insurance and Private Savings.” JPE 107 (December 1999): 1249–74.
  • Finkelstein, “The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare,” QJE, 122(1), Februuary 2007, 1-37.
  • Card, Dobkin and Maestas, “The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare,” AER, 98(5), December 2008, 2242-58.
  • Courtemanche, C., Marton, J., Ukert, B., Yelowitz, A., and Zapata, D., “Early Effects of the Affordable Care Act on Health Care Access, Risky Health Behaviors, and Self-Assessed Health,” Southern Economic Journal, January 2018, 84(3): 660-691.
  • Marton, J., Yelowitz, A., and Talbert, J., “Medicaid Program Choice, Inertia and Adverse Selection,” Journal of Health Economics, 2017, 56(1): 292-316.
  • Courtemanche, C., Marton, J., Ukert, B., Yelowitz, A., and Zapata, D., “Impacts of the Affordable Care Act on Health Insurance Coverage in Medicaid Expansion and Non-Expansion States,” Journal of Policy Analysis and Management, 2017, 36(1): 178-210.
  • Marton, J., Yelowitz, A. and Talbert, J., “A Tale of Two Cities? The Heterogeneous Impact of Medicaid Managed Care,” Journal of Health Economics, July 2014, 36(1): 47-68.
  1. Income Distribution and Welfare Programs
  • Gruber, Chapter 17
  • Yelowitz, “The Medicaid Notch, Labor Supply, and Welfare Participation: Evidence from Eligibility Expansions,” QJE, 110(4), November 1995, 909-939.
  • Moffitt, “Incentive Effects of the U.S.Welfare System: A Review.” JEL 30 (March 1992): 1–61.
  • Nichols and Zeckhauser, “Targeting Transfers through Restrictions on Recipients.” AER 72 (May 1982): 372–7.

Midterm Grades

for Undergraduate Students (Senate Rules 6.1.3.A) Mid-term grades will be posted in myUK by the deadline established in the Academic Calendar.

Excused Absences (Senate Rules 5.2.4.2) Senate Rules 5.2.4.2 defines the following as acceptable reasons for excused absences: (a) significant illness, (b) death of a family member, (c) trips for members of student organizations sponsored by an educational unit, trips for University classes, and trips for participation in intercollegiate athletic events, (d) major religious holidays, (e) interviews for graduate/professional school or full-time employment postgraduation, and (f) other circumstances found to fit “reasonable cause for nonattendance” by the instructor of record. Students should notify the professor of absences prior to class when possible.

If a course syllabus requires specific interactions (e.g., with the instructor or other students), in situations where a student’s total EXCUSED

Absences

exceed 1/5 (or 20%) of the required interactions for the course, the student shall have the right to request and receive a "W," or the

Instructor

of Record may award an “I” for the course if the student declines a “W.” (Senate Rules 5.2.4.2.1)

(If an attendance/interaction policy is not stated in the course syllabus or the policy does not include a penalty to the student, the Instructor cannot penalize the student for any unexcused absences.)

Verification of Absences (Senate Rules 5.2.4.2.A, B, C, and E) Students may be asked to verify their absences in order for them to be considered excused. Senate Rule 5.2.4.2 states that faculty have the right to request appropriate verification when students claim an excused absence due to: significant illness; death in the household, trips for classes, trips sponsored by an educational unit and trips for participation related to intercollegiate athletic events; and interviews for full-time job opportunities after graduation and interviews for graduate and professional school. (Appropriate notification of absences due to University-related trips is required prior to the absence when feasible and in no case more than one week after the absence.)

Religious Observances (Senate Rules 5.2.4.2.D) Students anticipating an absence for a major religious holiday are responsible for notifying the instructor in writing of anticipated absences due to their observance of such holidays. Please check the course syllabus for the notification requirement. If no requirement is specified, two weeks prior to the absence is reasonable and should not be given any later. Information regarding major religious holidays may be obtained through the Ombud’s website or calling.

Make-Up Work (Senate Rule 5.2.4.2) Students missing any graded work due to an excused absence are responsible: for informing the Instructor of Record about their excused absence within one week following the period of the excused absence (except where prior notification is required); and for making up the missed work. The instructor must give the student an opportunity to make up the work and/or the exams missed due to the excused absence, and shall do so, if feasible, during the semester in which the absence occurred. The instructor shall provide the student with an opportunity to make up the graded work and may not simply calculate the student's grade on the basis of the other course requirements, unless the student agrees in writing.

Accommodations Due to Disability If you have a documented disability that requires academic accommodations, please see me as soon as possible during scheduled office hours. In order to receive accommodations in this course, you must provide me with a Letter of Accommodation from the Disability Resource Center (DRC). The DRC coordinates campus disability services available to students with disabilities. Visit the DRC website, email the DRC, contact them by phone at, or visit their office on the corner of Rose Street and Huguelet Drive in the Multidisciplinary Science Building, Suite 407.

Non-Discrimination Statement and Title IX Information UK is committed to providing a safe learning, living, and working environment for all members of the University community. The University maintains a comprehensive program which protects all members from discrimination, harassment, and sexual misconduct. For complete information about UK’s prohibition on discrimination and harassment on aspects such as race, color, ethnic origin, national origin, creed, religion, political belief, sex, and sexual orientation, please see the electronic version of UK’s Administrative Regulation 6:1 (“Policy on Discrimination and Harassment”). In accordance with Title IX of the Education Amendments of 1972, the University prohibits discrimination and harassment on the basis of sex in academics, employment, and all of its programs and activities. Sexual misconduct is a form of sexual harassment in which one act is severe enough to create a hostile environment based on sex and is prohibited between members of the University community and shall not be tolerated. For more details, please see the electronic version of Administrative Regulations 6:2 (“Policy and Procedures for Addressing and Resolving Allegations of Sexual Assault, Stalking, Dating Violence, Domestic Violence, and Sexual Exploitation”). Complaints regarding violations of University policies on discrimination, harassment, and sexual misconduct are handled by the Office of Institutional Equity and Equal Opportunity (IEEO), which is located in 13 Main Building and can be reached by phone at . You can also visit the IEEO’s website.

Faculty members are obligated to forward any report made by a student related to IEEO matters to the Office of Institutional Equity and Equal Opportunity. Students can confidentially report alleged incidences through the Violence Intervention and Prevention Center, Counseling Center, or University Health Services.

Academic Integrity

– Prohibition on Plagiarism (Senate Rules 6.3.1) Per University policy, students shall not plagiarize, cheat, or falsify or misuse academic records. Students are expected to adhere to University policy on cheating and plagiarism in all courses. The minimum penalty for a first offense is a zero on the assignment on which the offense occurred. If the offense is considered severe or the student has other academic offenses on their record, more serious penalties, up to suspension from the University may be imposed.

Plagiarism and cheating are serious breaches of academic conduct. Each student is advised to become familiar with the various forms of academic dishonesty as explained in the Code of Student Rights and Responsibilities. Complete information can be found on the Academic Ombud page. A plea of ignorance is not acceptable as a defense against the charge of academic dishonesty. It is important that you review this information as all ideas borrowed from others need to be properly credited.

Senate Rule 6.3.1 (see current Senate Rules) states that all academic work, written or otherwise, submitted by students to their instructors or other academic supervisors, is expected to be the result of their own thought, research, or self-expression. In cases where students feel unsure about a question of plagiarism involving their work, they are obliged to consult their instructors on the matter before submission.

When students submit work purporting to be their own, but which in any way borrows ideas, organization, wording, or content from another source without appropriate acknowledgment of the fact, the students are guilty of plagiarism.

Plagiarism includes reproducing someone else's work (including, but not limited to a published article, a book, a website, computer code, or a paper from a friend) without clear attribution. Plagiarism also includes the practice of employing or allowing another person to alter or revise the work, which a student submits as his/her own, whoever that other person may be. Students may discuss assignments among themselves or with an instructor or tutor, but when the actual work is done, it must be done by the student, and the student alone.

When a student's assignment involves research in outside sources or information, the student must carefully acknowledge exactly what, where and how he/she has employed them. If the words of someone else are used, the student must put quotation marks around the passage in question and add an appropriate indication of its origin. Making simple changes while leaving the organization, content, and phraseology intact is plagiaristic. However, nothing in these Rules shall apply to those ideas, which are so generally and freely circulated as to be a part of the public domain.

Please note: Any assignment you turn in may be submitted to an electronic database to check for plagiarism.

academic integrity– Prohibition on Cheating (Senate Rules 6.3.2) Cheating is defined by its general usage. It includes, but is not limited to, the wrongfully giving, taking, or presenting any information or material by a student with the intent of aiding himself/herself or another on any academic work which is considered in any way in the determination of the final grade. The fact that a student could not have benefited from an action is not by itself proof that the action does not constitute cheating. Any question of definition shall be referred to the University Appeals Board.

academic integrity– Prohibition on Falsification/Misuse of Academic Records (SR 6.3.3) Maintaining the integrity, accuracy, and appropriate privacy of student academic records is an essential administrative function of the University and a basic protection of all students. Accordingly, the actual or attempted falsification, theft, misrepresentation or other alteration or misuse of any official academic record of the University, specifically including knowingly having unauthorized access to such records or the unauthorized disclosure of information contained in such records, is a serious academic offense. As used in this context, "academic record" includes all paper and electronic versions of the partial or complete permanent academic record, all official and unofficial academic transcripts, application documents and admission credentials, and all academic record transaction documents. The minimum sanction for falsification, including the omission of information, or attempted falsification or other misuse of academic records as described in this section is suspension for one semester.