PP210A The Economics of Public Policy Analysis Fall 2023
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Fall 2023
The Economics of Public Policy Analysis PP210A
Objective
The purpose of this course is to train MPP students to use microeconomic theory to analyze public policy problems and, more generally, everyday situations. We will be studying a wide range of theoretical topics, including (but not limited to) the basic functioning of markets, the analysis of decision making of individuals and households, inter-temporal decision making, and decision making under uncertainty. Throughout the semester, we will place particular emphasis on the application of theory to real public policy problems. Some of the applications we will discuss include the effect of Airbnb on rental markets, how the introduction of housing vouchers may impact housing costs for eligible non-recipients, whether the Consumer Price Index overstates the inflation rate, price-incentives faced by local governments that likely increase the use of state prisons, the relative benefits of cash vs. food assistance, the structure of the Supplemental Nutrition Assistance Program, and how insurance markets work, to name a few. A major objective of this course is to provide the bridge between abstract theory and real-world problems. Hence, this course will place heavy emphasis on applications.
Meeting Times
Class will meet Mondays and Wednesdays from 8:15 to roughly 10:00 am. We must start at 8:15 sharp! In addition, there are discussion sections on Fridays where material presented during the week will be reviewed.
We will be meeting in person.
Grades
Grades will be based on 3 exams (25 percent each) and 6 problems sets (worth a cumulative 25 percent). Problem sets will be handed out in class and are due a week later (or when noted on the syllabus). Late problem sets are docked 20 percentage points per day. While you will not be docked for incorrect answers on problem sets, the problem sets will provide important practice for the exams. Hence, I urge everyone to do their best and hand them in on time.
Readings
Our principal textbook is the fourth edition of Perloff, Jeffrey M (2013) Microeconomics: Theory and Applications with Calculus, Pearson Press. Either the third, fourth or fifth edition of this textbook is fine. On the syllabus, I list the reading section pages for the different editions. I will also post a number of additional individual readings on the course webpage
Office Hours
My office is on the third floor of the older building, room #310. My office hours for this course are on Wednesdays from 2:00 pm to 4:00 pm. I can also be reached by E-mail atstevenraphael@berkeley.edu
Week 1: Overview, Supply and Demand Specifying Individual Preferences |
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August 21 |
NO CLASS |
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August 23 |
Overview of Microeconomic Theory and Microeconomic Policy Analysis, Supply and Demand
REQUIRED READING [1.1] Perloff 3rd edition, Chapter 1 all and Chapter 2 pp 9-28 and pp 45-52 [1.2] Perloff 4th edition, Chapter 1 all and Chapter 2 pp 9-28 and pp 47-52 [1.3] Perloff 5th edition, Chapter 1 all and Chapter 2 pp 10-29 and pp 47-52 |
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Week 2: The Demand-Supply Model Applied to Housing Policy and Introduction to Optimization |
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August 28 |
Demand and Supply Continued, Preferences and individual decision-making REQUIRED READING [1] Erikson, Michael D. and Amanda Ross (2015), “Housing Vouchers and the Price of Rental Housing,” American Economic Journal: Economics Policy, 7(3): 154 – 176.
OPTIONAL READING [2] Bivens, Josh (2019), The Economic Costs and Benefits of Airbnb, Economic Policy Institute, Washington, D.C. [3] Diamond, Rebecca (2018), “What Does Economic Evidence Tell Us About the Effects of Rent Control?,” The Brookings Institution, Washington, D.C. HAND OUT PROBLEM SET #1 |
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August 30 |
Individual Choice and Optimization REQUIRED READING [1.1] Perloff, 3rd edition Chapter 3, pp 58-86. [1.2] Perloff, 4th edition Chapter 3, pp 60-86. [1.3] Perloff, 5th edition Chapter 3, pp 62-90. [2.1] Perloff 3rd Edition, Calculus appendix pp E1-E21. [2.2] Perloff 4th Edition, Calculus appendix pp E1-E22. [2.3] Perloff 5th edition Calculus Appendix pp E1-E18. |
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Week 3: Constrained Optimization Continued |
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September 4 |
NO CLASS |
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September 6 |
Optimization continued Required Reading [1] Hendren, Nathaniel and Ben Sprung-Keyser (2019), A Unified Welfare Analysis of Government Policies, Opportunity Insights, Harvard University.
Optional Reading/Activities [1] Hendren, Nathaniel and Ben Sprung-Keyser (2020), “A Unified Welfare Analysis of Government Policies,” Quarterly Journal of Economics, 135(3): 1209- 1318 (this is the full journal article behind the project) [2] visit the webpage and explore the visualizations |
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Week 4: Behavioral Responses to Changes in Prices and Income |
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September 11 |
Empirical examples of responses to changes in price and income and introduction to Income Effects, Substitution Effects, and Consumer Demand [1] Ouss, Aurelie (2020), “Misaligned Incentives and the Scale of Incarceration in the United States,” University of Pennsylvania Working Paper. [2.1] Perloff 3rd edition Chapter 4 [2.2] Perloff 4th edition Chapter 4 [2.3] Perloff 5th edition Chapter 4 PROBLEM SET #1 DUE |
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September 13 |
Income and substitution effects continued and the debate surrounding substitution bias in measuring price inflation [1] Johnson, David S. et. al (2006), “Price Measurement in the United States: A decade after the Boskin Report,” Monthly Labor Review, May 10- 19. [2] Kling, Jeffrey (2013), “Using the Chained CPI to Index Social Security, Other Federal Programs, and the Tax Code for Inflation,” testimony before the Subcommittee on Social Security, Committee on Ways and Means, U.S. House of Representatives.
HAND OUT PROBLEM SET #2 |
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Week 5: Cross Price Effects and Tax Incidence |
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September 18 |
Cross Price Effects and Demand Elasticities [1.1] Perloff, 3rd edition Chapter 2 pp 28-39 [1.2] Perloff 4th edition Chapter 2 pp 29-40 [1.3] Perloff 5th edition, Chapter 2 pp 30-40. [2] Brownell, Kelly D. et. al. (2009), “The Public Health and Economic Benefits of Taxing Sugar-Sweetened Beverages,” The New England Journal of Medicine, 361 (16): 1599- 1605. |
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[3] Colchero, M Arantxa; Popkin, Barry M; Rivea Juan A. and Shu Wen Ng (2016), “Beverage Purchases From Stored in Mexico Under the Excise Tax on Sugar Sweetened Beverages: Observational Study,” British Medical Journal, 352: 1-9. [4] Grogger, Jeffrey (2015), “Soda Taxes and the Prices of Sodasa and Other Drinks: Evidence from Mexico,” National Bureau of Economics Research Working Paper #21197. |
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September 20 |
Who bears the incidences of a sales tax? [1.1] Perloff 3rd Edition Chapter 2, pp 39-45. [1.2] Perloff 4th Edition Chapter 2, pp 41-47. [1.3] Perloff 5th Edition Chapter 2, pp 41-47. |
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Week 6: Cash vs. in-kind support: some motivation for why we |
2023-09-25