Public Finance and Public Policy , Third Edition

Description

When it first appeared, Jonathan Gruber’s Public Finance and Public Policy was the first textbook to truly reflect the way public finance issues were evaluated, implemented, and researched in the real world today.  Like no other text available, it enhanced its survey of essential, traditional topics with an emphasis on empirical work and coverage of transfer programs and social insurance. Coming in the wake of the 2008 financial crisis, the presidential election, the 2009 stimulus package, and ongoing debates over financial reform and health care reform—Gruber is the author of Massachusetts’ universal coverage plan—the new edition couldn’t be more timely.Thoroughly updated, Public Finance and Public Policy, Third Edition brings students up to date on the important debates that are dominating today’s policymaking, giving them the basic tools they need to understand fundamental public finance issues now and in the future. Cover Page ......Page 1 Title Page ......Page 5 Copyright Page ......Page 6 About the Author ......Page 7 Brief Contents ......Page 8 Contents ......Page 9 Preface ......Page 29 1 Why Study Public Finance?......Page 41 1.1 The Four Questions of Public Finance......Page 43 1.2 Why Study Public Finance? Facts on Government in the United States and Around the World......Page 50 1.3 Why Study Public Finance Now? Policy Debates over Social Security, Health Care, and Education......Page 60 1.4 Conclusion......Page 62 2 Theoretical Tools of Public Finance ......Page 65 2.1 Constrained Utility Maximization ......Page 66 2.2 Putting the Tools to Work: TANF and Labor Supply Among Single Mothers......Page 77 2.3 Equilibrium and Social Welfare......Page 83 2.4 Welfare Implications of Benefit Reductions: The TANF Example Continued......Page 95 2.5 Conclusion......Page 97 3 Empirical Tools of Public Finance ......Page 103 3.1 The Important Distinction Between Correlation and Causality......Page 104 3.2 Measuring Causation with Data We’d Like to Have: Randomized Trials......Page 106 3.3 Estimating Causation with Data We Actually Get: Observational Data......Page 111 3.4 Conclusion......Page 125 4 Budget Analysis and Deficit Financing......Page 131 4.1 Government Budgeting......Page 133 4.2 Measuring the Budgetary Position of the Government: Alternative Approaches......Page 138 4.3 Do Current Debts and Deficits Mean Anything? A Long-Run Perspective......Page 143 4.4 Why Do We Care About the Government’s Fiscal Position?......Page 153 4.5 Conclusion......Page 158 5 Externalities: Problems and Solutions......Page 161 5.1 Externality Theory......Page 163 5.2 Private-Sector Solutions to Negative Externalities......Page 170 5.3 Public-Sector Remedies for Externalities......Page 174 5.4 Distinctions Between Price and Quantity Approaches to Addressing Externalities......Page 177 5.5 Conclusion......Page 186 6 Externalities in Action: Environmental and Health Externalities......Page 189 6.1 Acid Rain......Page 190 6.2 Global Warming......Page 195 6.3 The Economics of Smoking......Page 205 6.4 Economics of Other Addictive Behaviors......Page 213 6.5 Conclusion......Page 217 7 Public Goods......Page 221 7.1 Optimal Provision of Public Goods......Page 222 7.2 Private Provision of Public Goods......Page 227 7.3 Public Provision of Public Goods......Page 234 7.4 Conclusion......Page 239 8 Cost-Benefit Analysis......Page 245 8.1 Measuring the Costs of Public Projects......Page 246 8.2 Measuring the Benefits of Public Projects......Page 250 8.3 Putting It All Together......Page 261 8.4 Conclusion......Page 263 9 Political Economy......Page 267 9.1 Unanimous Consent on Public Goods Levels......Page 269 9.2 Mechanisms for Aggregating Individual Preferences......Page 272 9.3 Representative Democracy......Page 281 9.4 Public Choice Theory: The Foundations of Government Failure......Page 289 9.5 Conclusion......Page 298 10 State and Local Government Expenditures......Page 301 10.1 Fiscal Federalism in the United States and Abroad......Page 303 10.2 Optimal Fiscal Federalism......Page 307 10.3 Redistribution Across Communities......Page 315 10.4 Conclusion......Page 325 11 Education ......Page 329 11.1 Why Should the Government Be Involved in Education?......Page 332 11.2 How Is the Government Involved in Education?......Page 334 11.3 Evidence on Competition in Education Markets......Page 344 11.4 Measuring the Returns to Education......Page 347 11.5 The Role of the Government in Higher Education......Page 351 11.6 Conclusion......Page 355 12 Social Insurance:The New Function of Government......Page 359 12.1 What Is Insurance and Why Do Individuals Value It?......Page 361 12.2 Why Have Social Insurance? Asymmetric Information and Adverse Selection......Page 366 12.3 Other Reasons for Government Intervention in Insurance Markets......Page 373 12.4 Social Insurance vs. Self -Insurance: How Much Consumption Smoothing?......Page 377 12.5 The Problem with Insurance: Moral Hazard......Page 382 12.7 Conclusion......Page 386 13 Social Security ......Page 393 13.1 What Is Social Security and How Does It Work?......Page 394 13.2 Consumption-Smoothing Benefits of Social Security......Page 404 13.3 Social Security and Retirement......Page 407 13.4 Social Security Reform......Page 414 13.5 Conclusion......Page 425 14 Unemployment Insurance, Disability Insurance, and Workers’ Compensation......Page 429 14.1 Institutional Features of Unemployment Insurance, Disability Insurance, and Workers’ Compensation......Page 431 14.2 Consumption-Smoothing Benefits of Social Insurance Programs......Page 437 14.3 Moral Hazard Effects of Social Insurance Programs......Page 438 14.4 The Costs and Benefits of Social Insurance to Firms......Page 446 14.5 Implications for Program Reform......Page 450 14.6 Conclusion......Page 453 15 Health Insurance I:Health Economics and Private Health Insurance ......Page 459 15.1 An Overview of Health Care in the United States......Page 461 15.2 How Generous Should Insurance Be to Patients?......Page 472 15.3 How Generous Should Insurance Be to Medical Providers?......Page 485 15.4 Conclusion......Page 488 16 Health Insurance II:Medicare, Medicaid, and Health Care Reform......Page 493 16.1 The Medicaid Program for Low -income Mothers and Children......Page 495 16.2 What Are the Effects of the Medicaid Program?......Page 497 16.3 The Medicare Program......Page 502 16.4 What Are the Effects of the Medicare Program?......Page 506 16.5 Long-term Care......Page 515 16.6 Lessons for Health Care Reform in the United States......Page 516 16.7 Conclusion......Page 524 17 Income Distribution and Welfare Programs......Page 529 17.1 Facts on Income Distribution in the United States......Page 531 17.2 Welfare Policy in the United States......Page 536 17.3 The Moral Hazard Costs of Welfare Policy......Page 539 17.4 Reducing the Moral Hazard of Welfare......Page 545 17.5 Welfare Reform......Page 557 17.6 Conclusion......Page 559 18 Taxation in the United States and Around the World......Page 563 18.1 Types of Taxation......Page 564 18.2 Structure of the Individual Income Tax in the United States......Page 567 18.3 Measuring the Fairness of Tax Systems......Page 572 18.4 Defining the Income Tax Base......Page 576 18.5 Externality/Public Goods Rationales for Deviating from Haig -Simons......Page 579 18.6 The Appropriate Unit of Taxation......Page 590 18.7 Conclusion......Page 594 19 The Equity Implications of Taxation: Tax Incidence......Page 597 19.1 The Three Rules of Tax Incidence......Page 599 19.2 Tax Incidence Extensions......Page 608 19.3 General Equilibrium Tax Incidence......Page 615 19.4 The Incidence of Taxation in the United States......Page 620 19.5 Conclusion......Page 624 20 Tax Inefficiencies and Their Implications for Optimal Taxation......Page 629 20.1 Taxation and Economic Efficiency......Page 630 20.2 Optimal Commodity Taxation......Page 641 20.3 Optimal Income Taxes......Page 647 20.4 Tax-benefit Linkages and the Financing of Social Insurance Programs......Page 651 20.5 Conclusion......Page 656 21 Taxes on Labor Supply ......Page 663 21.1 Taxation and Labor Supply—Theory......Page 665 21.2 Taxation and Labor Supply—Evidence......Page 668 21.3 Tax Policy to Promote Labor Supply: The Earned Income Tax Credit......Page 671 21.4 The Tax Treatment of Child Care and Its Impact on Labor Supply......Page 679 21.5 Conclusion......Page 683 22 Taxes on Savings ......Page 687 22.1 Taxation and Savings—Theory and Evidence......Page 688 22.2 Alternative Models of Savings......Page 695 22.3 Tax Incentives for Retirement Savings......Page 698 22.4 Conclusion......Page 712 23 Taxes on Risk Taking and Wealth......Page 715 23.1 Taxation and Risk Taking......Page 717 23.2 Capital Gains Taxation......Page 721 23.3 Transfer Taxation......Page 728 23.4 Property Taxation......Page 734 23.5 Conclusion......Page 738 24 Corporate Taxation ......Page 741 24.1 What Are Corporations and Why Do We Tax Them?......Page 743 24.2 The Structure of the Corporate Tax......Page 749 24.3 The Incidence of the Corporate Tax......Page 753 24.4 The Consequences of the Corporate Tax for Investment......Page 754 24.5 The Consequences of the Corporate Tax for Financing......Page 762 24.6 Treatment of International Corporate Income......Page 770 24.7 Conclusion......Page 774 25 Fundamental Tax Reform ......Page 777 25.1 Why Fundamental Tax Reform?......Page 778 25.2 The Politics and Economics of Tax Reform......Page 788 25.3 Consumption Taxation......Page 794 25.4 The Flat Tax......Page 803 25.5 Conclusion......Page 807 Glossary......Page 809 References......Page 821 Name Index......Page 839 Subject Index......Page 845