Environmental

Economics

Course Outlines

George Bitsakakis

Oxford University

E-mail: George.Bitsakakis@economics.ox.ac.uk

OXFORD

Journal Abbreviations

AER := American Economic ReviewBEQB := Bank of England Quarterly BulletinBPEA := Brookings Papers on Economic ActivityECA := EconomicaECB := European Central BankECRA := EconometricaEER := European Economic ReviewEJ := Economic JournalELT := Economic LettersEP := Economic PolicyHOPE := History of Political EconomyIMF := International Monetary FundIMFSP := IMF Staff PapersJEL := Journal of Economic LiteratureJEP := Journal of Economic PerspectivesJES := Journal of Economic SurveysJMCB := Journal of Money Credit and BankingJME := Journal of Monetary EconomicsJPubE := Journal of Public EconomicsJPE := Journal of Political EconomyNBER := National Bureau of Economic ResearchNIESR := National Institute Economic ReviewOECD EO:= OECD Economic OutlookOEP := Oxford Economic PapersOXREP := Oxford Review of Economic PolicyPP := Public PolicyQJE := Quarterly Journal of EconomicsRES := Review of Economic StudiesWEO := World Economic Outlook

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@ economics.ox.ac.uk

OUTLINE

Summary This course consists of SIX (6) tutorials. It is intended for a UGA audiencewith interest in the topic.

Essays Students will write an essay per topic to be discussed during tutorial time. Atotal of five (5) essays is expected.

Texts Apart from,

Common, M. & S. Stagl, (2012), Ecological Economics, CUP

texts that I will ask you to consult frequently are,

[1]. Perman, R., Ma, Y., McGilvray, J. & M. Common, (1999), NaturalResource and Environmental Economics, 2nd edn, Harlow: Longman

[2]. Kolstad, C., (2000), Environmental Economics, Oxford: OxfordUniversity Press

[3]. Hanley, N., Shogren, J. & B. White, (1997), EnvironmentalEconomics in Theory and Practice, Basingstoke: Macmillan

I shall be also frequently referring to the following titles in almost all topicsdiscussed. I highly recommend them.

Barr, N., (2012), The Economics of the Welfare State, 5th edn Cullis, J. & P. Jones,(1998 & 2015), Public Finance & Public Sector, OUP Hindricks, J. & G. Myles, (2006), Intermediate Public Economics, MIT

Press Leach, J., (2004), A Course in Public Economics, CUP Stiglitz, J., (2000), Economics of the Public Sector, 3rd edn, Norton

In addition, two books that have an Oxford essay type of approach and highlyreadable summaries of the arguments are:

Bailey, S. J., (2002), Public Sector Economics, 2nd edn, Palgrave Barr, N., (2001), The Welfare State as a Piggy Bank, OUP

Typical graduate/reference texts we shall use are,

Atkinson, A. B. & J. E. Stiglitz, (1980), Lectures on Public Economics,McGraw-Hill

Myles, G. D., (1995), Public Economics, CUP Auerbach, A. & M. Feldstein, (eds.), (1987), Handbook of Public

Economics, North Holland Markandya, A., Harou, P., Cistulli, V. & L. Bellu, (2002),

Environmental Economics for Sustainable Growth, Edward Elgar:Cheltenham UK

ScheduleTopic 1 Environment: Welfare Economics Foundations

Topic 2 Environment & Market Failure;Local Market Failure & Jurisdictional Issues

Topic 3 Environment: Theory & Policies

Topic 4 Environmental Accounting & Cost-Benefit Analysis;Risk & Uncertainty

Topic 5 Optimal Environmental Taxation 1 & 2

Topic 6 Environment & Growth

Note 1. Attempt the starred reading first in all Outlines below.2. Write one essay from the suggested titles in each topic. Try to type your

essays (12 dots fonts, double-space format) and scrutinise your readingsso that tutorials run efficiently.

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

ENVIRONMENT: WELFARE ECONOMICFOUNDATIONS

KeyTopics

1. The general equilibrium Arrow-Debreu-McKenzie model2. The two fundamental theorems of welfare economics & Arrow’s impossibility

theorem; social welfare functions3. The theory of the second best4. Optimal taxation; taxation and incentives5. Sources of breakdown of the free enterprise market system6. Imperfect/incomplete information; Limits to redistribution7. Allocative arguments about the role of the state:

The definition of efficiency Efficiency & the market State intervention for efficiency reasons

8. The equity role of the state: Social justice from the perspective of different ideologies Definitions of equity & equality Charity & the free-rider problem

BasicReading

Books1. Bailey, (2002), Public Sector Economics, 2nd edn, chs 1 & 22. *Barr, (2012), The Economics of the Welfare State, chs 1, 3, 4 & 63. *-----, (2001), The Welfare State as a Piggy Bank, chs 1 & 24. *Boadway & Bruce, (1989), Welfare Economics, chs 1-35. *Cullis & Jones,(1998), Public Finance and Public Choice, chs 15,166. Friedman, M. & R., (1980), Free to Choose7. Gravelle & Rees, (2004), Microeconomics, Longman, 3rd edn, ch 16, 178. *Hausman & McPherson, Economic Analysis & Moral Philosophy, chs 3-129. Hausman, The Inexact & Separate Science of Economics, chs 3-610. *Hindricks & Myles, Intermediate Public Economics, parts I & II11. Jones & Posnett, (1993), “The Economics of Charity”, in Barr, N. & D.

Whynes, (eds), Current Issues in the Economics of Welfare12. Knowles, Political Philosophy, chs 2, 3, 413. Koutsoyiannis, Modern Microeconomics, chs 22, 2314. *Le Grand, (1988), Equity & Choice, chs 3, 615. Lesnoff, Political Philosophers of the 20th Century, chs 7, 10-1316. Okun, (1975), Equality & Efficiency: The Big Trade-off,17. Piachaud, (1993), “The Definition & Measurement of Poverty & Inequality”, in

Barr & Whynes, (eds), Current Issues in the Economics of Welfare

18. **Common & Stagl, (2012), Ecological Economics, CUP, chs 1-5; 8, 919. *Stiglitz, (2000), Economics of the Public Sector, 3rd edn, chs 1, 3, 420. Titmuss, (1973), The Gift Relationship, chs 13 & 14

Papers1. *Barr, (1992), “Economic Theory & the Welfare State”, JEL, 30 (2), pp. 741-8032. **Bitsakakis, (2017), “Welfare and Redistribution”3. *-------------, (2017), “Taxation, Welfare and Distributive Justice”4. Dasgupta, (1982), "Utilitarianism, Information and Rights" in Sen, A & B.

Williams, Utilitarianism and Beyond, pp. 199-2185. Heady, (1993), "Optimal Taxation as a Guide to Tax Policy", Fiscal Studies6. Sen, (1979), "Personal Utilities and Public Judgements: or What’s Wrong with

Welfare Economics?" Economic Journal, 89, 537-58, reprinted in A. Sen, (1982),Choice, Welfare and Measurement

NB: A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: aDictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: a

Dictionary of Economics, (8 vols), 2nd edn. See various entries such as, WelfareEconomics, Second Best Theory, General Equilibrium, Intertemporal Equilibrium &Efficiency, Overlapping Generations Model of General Equilibrium, Pareto Efficiencyetc.

FurtherReading

Books1. *Atkinson, A.B. & J.E. Stiglitz, (1980), Lectures on Public Economics,

McGraw-Hill, Lectures 1, 9, 112. Myles, G. D., (1995), Public Economics, Cambridge University Press, chs 1-33. Jehle J. A. & P. J. Reny, (2001), Advanced Microeconomic Theory, 2nd edn, chs

5, 6

4. Leach, J., (2004), A Course in Public Economics, CUP, chs 1-5,5. Mas-Colell, A., Whinston, M.D. & J.R. Greene, (1995), Microeconomic

Theory, OUP, chs 10, 15-18, 216. Romer, J. E., (1996), Theories of Distributive Justice, HUP, chs 4, 57. *Silberberg, E. & W. Suen, (2001), The Structure of Economics: a

Mathematical Analysis, 3rd edn, ch 198. Varian, H., (1992), Microeconomic Analysis, 3rd edn, Norton, chs 17, 18, 21, 22

Papers1. *Mirrlees, J., "Notes on Welfare Economics, Information and Uncertainty" in M.

Balch, D. McFadden and S. Wu, (eds), Economic Behaviour under Uncerainty,North Holland, 1974

2. Dasgupta, P. and P. Hammond, "Fully Progressive Taxation", JPubEcon, 13,pp 141-54, 1980

3. Allingham, M., "Towards an Ability Tax", JPubEcon, 4, pp 361-76, 1975

4. Piketty, T., ‘The Dynamics of the Wealth Distribution and the Interest Rate withCredit Rationing’, RevEconStu, 1997

EssayTopics

1. The best form of government intervention is no intervention at all. Discuss.2. Why is the state involved in redistribution from rich to poor rather than leaving

it to voluntary charity? Why do high income individuals vote for redistributivepolicies?

3. What are the limits to redistribution? How sensitive are these limits toassumptions on the information available to the social planner?

4. Is the notion of "utility" useful in guiding policies towards redistribution?5. How is the Walrasian general equilibrium analysis and the two fundamental

theorems of welfare economics inform economic policy and in what way theyare, if at all, practically relevant?

6. How does information available to the social planner affect the extent to whichresources can be redistributed?

7. Should maximisation of a social welfare function always be the policy objective?8. “The welfare economics approach to policy choices is flawed because it always

assumes that the end justifies the means”. Discuss.9. Is it possible to compare the well-being of,

(i) different people with different skills, assets and tastes;(ii) the same person at different points of his or her life cycle;(iii) people in different generations?What implications do your answers have for public policy?

10. Does the idea of 'social limits to economic growth' imply that growth should beabandoned as an economic objective?

11. Are there reasons to suppose that relative wellbeing is more important toindividuals than their absolute standard of living? What considerations shouldplay a role in the international comparison of standard of living?

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

ENVIRONMENT & MARKET FAILUREKeyTopics

1. Sources of Breakdown of the Fee Enterprise Market System: Market Imperfections (monopoly power, information inadequacy &

asymmetry) Market Failures (public goods, joint products, externalities) Dynamic Incapacities (micro & macro instability, protectionism) Normative Issues (equity, merit & demerit goods)

2. Market Failure & Revelation Mechanisms3. The modification of general equilibrium Arrow-Debreu model & the fundamental

theorems of welfare economics to allow for market failures; Principles for Policy

BasicReading

Books1. Bailey, (2002), Public Sector Economics, 2nd edn, Palgrave, ch 142. -------, (2004), Strategic Public Finance, Palgrave, chs 1 & 23. *Barr, (2012), The Economics of the Welfare State, OUP, chs 3, 154. ------, (2001), The Welfare State as a Piggy Bank, OUP, chs 15 & 165. Besanko & Braeutigam, (2002), Microeconomics: an Integrated Approach, ch

176. **Boadway R. & N. Bruce, (1989), Welfare Economics, chs 3-5

7. ***Common, M. & S. Stagl, (2012), Ecological Economics, CUP, chs5, 8, 9, 10

8. *Cullis, J. & P. Jones,(1998& 2015), Public Finance and Public Choice, chs 2, 39. *El-Agraa, A.M., (2001), The European Union: Economics & Policies, 6th edn,

ch2010. Friedman, M. & R., (1980), Free to Choose, Pelican11. *Gravelle, H & R. Rees, (2004), Microeconomics, Longman, 3rd edn, ch 1812. *Greer, F. G., (1987), Business, Government and Society, Macmillan, ch 2313. Henderson J.M. & R.E. Quandt, (1958), Microeconomic Theory, ch 714. *Hindricks & Myles, Intermediate Public Economics, parts III, IV & V15. Katz & Rosen, (2002), Microeconomics, ch 1816. Koutsoyiannis, M., (1985), Modern Microeconomics, ch 2317. *Leach, A Course in Public Economics, chs 6-1518. *Mishkin, E.,(1998), Introduction to Political Economy, chs 1-319. Nicholson, W., (2000), Microeconomic Theory, Dryden, chs 17-19, 26, 2720. Perloff, Microeconomics, (2nd edn), ch 1821. *Stiglitz, J., (2000), Economics of the Public Sector, Norton, 3rd edn, chs 6-922. Varian, H., (2002), Intermediate Microeconomics, 6th edn, chs 32, 35

Papers23. *Barr, N., (1992), “Economic Theory & the Welfare State”, JEL, 30 (2), pp 741-

80324. Bitsakakis, G., (2017), “Optimal Taxation from an Efficiency and a Distributive

Point of View”25. **-------------, (2017), “Taxation, Welfare and Distributive Justice”26. **-------------,, (2017), “Market Failure: Externalities, Public Goods & Joint

Products”27. -------------, (2017), “Merit Goods & Social Welfare”28. Coase, R., (1960), 'The problem of social cost', Journal of Law and Economics,

pp 1-44; also in W. Oates, (ed), The Economics of the Environment, Elgar,1992

29. **Farrell, J., (1987), "Information and the Coase Theorem", J of EconPerspectives

30. **Harris, H. D., (1990),”Economic Negligence, Moral Hazard and the CoaseTheorem”, Southern Econ Journal, pp 698-704

A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: a

Dictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: aDictionary of Economics, (8 vols), 2nd edn. See entries Externalities, Public Goods,Lindahl Equilibrium etc.

FurtherReading

Books

1. *Atkinson, A. B. & J. E. Stiglitz, (1980), Lectures on Public Economics,McGraw-Hill, Lecture 1, 9, 11

2. *Little, I. M. D., (2002), A Critique of Welfare Economics, OUP, chs VII-XI3. Myles, G. D., (1995), Public Economics, Cambridge Univ. Press, pp 319-3474. Ng, Y.K., (1979), Welfare Economics, chs 7, 85. Jehle J. A. & P. J. Reny, (2001), Advanced Microeconomic Theory, 2nd edn, chs

5, 66. *Mas-Colell, A., Whinston, M. D. & J. R. Greene, (1995), Microeconomic

Theory, OUP, chs 10, 15-18, 217. *Roemer, J. E., (1996), Theories of Distributive Justice, HUP, chs 4, 58. *Silberberg, E. & W. Suen, (2001), The Structure of Economics: a

Mathematical Analysis, 3rd edn, ch 199. Varian, H., (1992), Microeconomic Analysis, 3rd edn, Norton, chs 17, 18, 21, 2210. *Winch, D., (1986), Analytical Welfare Economics, Penguin, chs 1-4

Papers

1. *Barr, N., “Economic Theory and the Welfare State: A Survey andInterpretation”, JEL, 30, 2, pp 741-803, 1992

2. Mirrlees, J., "Notes on Welfare Economics, Information and Uncertainty" in M.Balch, D. McFadden and S. Wu, (eds), Economic Behaviour under Uncerainty,North Holland, 1974

3. Journal of Economic Perspectives, Symposium on Network Externalities,1994

4. Kahneman, D., Knetsch, J. L. & R H. Thaler, "Experimental Tests of theEndowment Effect and the Coase Theorem", JPE, 1990 also in Camerer, C. F.Loewenstein, G. & M. Rabin, (eds), Advances in Behavioural Economics, PUP,2004

EssayTopics

1. "Externality problems can best be resolved through the allocation of propertyrights." "Externality problems can best be resolved using price instruments".Adjudicate.

2. "The Coase solution to externalities works if and only if a small number ofagents is involved". Discuss.

3. Does the analysis of public goods pose any problems additional to those raisedby the analysis of externalities?

4. What are the appropriate policy responses to the existence of networkexternalities?

5. Does the Coase theorem offer any practical help to policymakers?6. Compare and contrast externalities and public goods. Show, with examples,

how they present different problems for public policy.7. Is there an economically efficient way of (a) pricing radio broadcasts? (b)

monitoring pollution domestically/internationally?8. Does the theory of public goods provide useful guidance on the allocation of

resources in the public sector?9. What considerations determine the efficient levels of (a) smoking and (b)

immunization against infectious diseases? Is it practical to achieve these?10. "Individuals will always reveal their private preferences if they are appropriately

rewarded. There is thus no problem of public goods provision". Discuss.

Practice 1. De Meza & Osborne, Problems in Price Theory, ch 152. Varian & Bergstrom, Workout Book for Intermediate Microeconomics, quiz 31,

33

True or 1. A road is a non-rival good since the use by one does not reduce the use byanother

False 2. In a world without government intervention a market economy will neverproduce a public good

3. If a non-rival good is sold in the market its price must exceed the marginalsocial cost of additional usage. It follows that collective government provisionwould lead to a potential Pareto improvement

4. A trade between two parties is an example of an externality5. The “tragedy of commons” refers to the tendency of public property to be

overused

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

LOCAL MARKETFAILURE: MULTILATERAL

EXTERNALITIES;LOCAL PUBLIC GOODS

KeyTopics

Definitions Levels of government The assignment problem Is the EU different from a usual federation? Fiscal instruments in a federal system Tax competition, tax diversity, fiscal harmonization & co-ordination Normative Issues Local Market Failure & Revelation Mechanisms Principles for Policy; Empirical evidence

BasicReading

Books1. Bailey, Public Sector Economics, ch 142. Barr, The Economics of the Welfare State, chs 15 & 16

3. **Common & Stagl, (2012), Ecological Economics, CUP, chs 5, 8, 9,104. **Connolly & Munro, Economics of the Public Sector, chs 4, 5, 245. Cullis & Jones, Public Finance and Public Choice, chs 2, 36. *El-Agraa, The European Union: Economics & Policies, ch 207. *Greer, Business, Government and Society, Macmillan, ch 238. **Hindricks & Myles, Intermediate Public Economics, part VII9. *Ledyard, ‘Public Goods: A Survey of Experimental Research’, in J. Kagel and

A. Roth (eds), (1995), Handbook of Experimental Economics, PrincetonUniversity Press

10. *Leach, A Course in Public Economics, chs 18-2611. *Mishkin, Introduction to Political Economy, chs 1-312. **Stiglitz, Economics of the Public Sector, Norton, 3rd edn, chs 6-9

Papers13. Haan, M. & P. Kooreman, (2002), ‘Free Riding and the Provision of Candy

Bars’, Journal of Public Economics, 83, pp 277-29114. Hoffman, E. & M. Spitzer, (1986) ‘The Coase Theorem: Some Experimental

Tests’, Journal of Law and Economics, 25, pp73-9815. *W. Oates, (1999) "An Essay on Fiscal Federalism", Journal of Economic

Literature, 37, pp 1120-4916. *Page, W. H. & J. E. Lopatka, (2006), “Network Externalities”, Encyclopedia

of Law & Economics, Bouckaert, B. and De Geest, G. (eds.), Aldershot,Edward Elgar

17. *Persson, T. & G. Tabellini, (1996), "Federal fiscal constitutions: risk sharingand redistribution", Journal of Political Economy, 104, pp 979-1009

18. *Piketty, T., (1996), "A federal voting mechanism to solve the fiscal-externalityproblem", European Economic Review, 40, pp 3-17

19. *Tiebout, C. M., (1956), "A pure theory of local expenditure", Journal ofPolitical Economy, 64, pp 416-424

A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: aDictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: aDictionary of Economics, (8 vols), 2nd edn. See entries Externalities, Public Goods,Tiebout Hypothesis etc.

FurtherReading

Books1. **Atkinson, A. B. & J. E. Stiglitz, (1980), Lectures on Public Economics,

McGraw-Hill, Lecture 1, 9, 112. *King, D., (1993), "Issues in Multi-Level Government", in P. M. Jackson, (ed),

Current Issues in Public Sector Economics, pp 156-1823. Little, I. M. D., (2002), A Critique of Welfare Economics, OUP, chs VII-XI4. Mueller, D. C., (1989), Public Choice II, ch 95. Myles, G. D., (1995), Public Economics, Cambridge Univ. Press, pp 319-3476. *Mas-Colell, A., Whinston, M. D. & J. R. Greene, (1995), Microeconomic

Theory, OUP, chs 10, 11*, 15-18, 217. *Silberberg, E. & W. Suen, (2001), The Structure of Economics: a

Mathematical Analysis, 3rd edn, ch 198. **Rubinfeld, D., (1987), ‘The Economics of the Local Public Sector’, in A.

Auerbach & M. Feldstein, (eds.), Handbook of Public Economics, vol 2, NorthHolland

Papers1. Broadway, R., M. Marchand & M. Vigneault, (1998), "The consequences of

overlapping tax bases for redistribution and public spending in a federation",Journal of Public Economics, 68, pp 453-78

2. Mirrlees, J., "Notes on Welfare Economics, Information and Uncertainty" in M.Balch, D. McFadden and S. Wu, (eds), Economic Behaviour under Uncerainty,North Holland, 1974

3. Journal of Economic Perspectives, Symposium on Network Externalities,1994

4. Rothstein, J., (2006), ‘Good Principals or Good Peers? Parental Valuation ofSchool Characteristics, Tiebout Equilibrium, and the Incentive Effects ofCompetition Among Jurisdictions’, American Economic Review (forthcoming)

5. Weitzman, (1974), ‘Prices versus Quantities’, Review of Economic Studies, 41,pp 477-491

EssayTopics

1. “For both local externalities and local public goods, the most difficult problemfacing the policy maker is preference revelation”. Do you agree?

2. Which public goods and services should be provided by local rather than nationalgovernment? How should they be financed?

3. Are different instruments needed to tackle missing markets as opposed to othertypes of market failure?

4. “The mobility of capital and labour within the European Union gives eachmember state an incentive to under-provide national public goods. Europeanwelfare would be increased if public good provision were decided at the Unionlevel”. Discuss.

5. "Mobility between jurisdictions ensures efficient public good provision.""Tax competition between jurisdictions leads to under-provision of publicgoods". Adjudicate.

6. Should the quantity and quality of public services differ by location?7. "The Coase theorem requires a single political jurisdiction and simultaneous

bargaining. It therefore provides no guidance for solving externality problemsextending across national boundaries and involving long time periods". Discuss.

8. How should the aims of equity and efficiency be reconciled in the design of asystem of local taxation and expenditure in the U.K.?

9. "The real case for having local governments is the existence of local publicgoods". Discuss.

10. Does the analysis of local public goods pose any problems additional to thoseraised by the analysis of local externalities?

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

ENVIRONMENT: THEORY & POLICIES

Key Topics 1. Optimal pollution and environmental externalities, sustainability & conditions forefficiency, discounting, polluter pays principle.

2. Private bargaining solutions vs government intervention: instruments-taxation,effluent charges, permits, regulation, zoning; policy appraisal: cost-benefitanalysis, environmental impact assessment & the role of R&D

3. Case studies: global warming, biodiversity

Introductory&IntermediateLevel Texts

1. *Bailey, Public Sector Economics, (2nd edn), chs 2, 142. *Barr, The Economics of the Welfare State, chs 3, 43. **Beckerman, Small is Stupid4. Besanko & Braeutigam, Microeconomics: an Integrated Approach, ch 17

5. **Common, M. & S. Stagl, (2012), Ecological Economics, CUP, chs 10,11, 12, 13, 14

6. *Cullis & Jones, Public Finance and Public Choice, chs 1,2,37. **El-Agraa, The European Union: Economics & Policies, 6th edn, ch 208. **Greer, Business, Government and Society, ch 239. **Schumacher, Small is Beautiful10. **Stiglitz, Economics of the Public Sector, (3rd edn), chs 6-9

A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: aDictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: aDictionary of Economics, (8 vols), 2nd edn. See related entries

FurtherReading(Advanced)

Books1. *Atkinson et al, Measuring Sustainable Development, ch 12. *Baumol & Oates, The Theory of Environmental Policy, 2nd edn3. **Bromley, The Handbook of Environmental Economics, chs 1, 2, 34. **Cornes & Sandler, The Theory of Externalities, Public Goods and Club Goods,

chs 1-35. *Helm, Economic Policy Towards the Environment, chs 1, 2, 46. *Hanley, Shogun & White, Environmental Economics in Theory and Practice, chs

1, 27. Jehle & Reny, Advanced Microeconomic Theory, ch 98. **Kolstad, C., Environmental Economics9. *Myles, Public Economics, ch 9, 1010. *Milgrom & Roberts, Economics, Organization and Management, chs 2, 14, 1611. **Sandmo, A., The Public Economics of the Environment12. **Stiglitz & Muet (eds), Governance, Equity, and Global Markets, chs 18-2113. Varian, Microeconomic Analysis, chs 23, 2414. *Viscusi, Vernon & Harrington, (1992), Economics of Regulation and Antitrust,

part 3: ch 21

Papers1. *Barker, T., (1994), “Achieving the Rio target: CO2 abatement through fiscal

policy in the UK”, Fiscal Studies, 15:3, 1-182. **Dasgupta, P., (2000), Valuing Biodiversity, in Simon Levin (ed), Encyclopedia

of Biodiversity, Academic Press3. HMSO, (1990), This Common Inheritance: Britain's Environmental Strategy, Cmnd

12004. HMSO, (1999), A better quality of life, Cmnd 43455. HMSO, (2000), Climate Change: The UK Programme, Cm 4913

http://www.defra.gov.uk/environment/climatechange/07.htm6. HMSO, (2001), Framework for the UK Emissions Trading Scheme

http://www.defra.gov.uk/environment/climatechange/trading/index.htm7. **International Tax and Public Finance, Special Issue: Public Finance & the

Environment, 2:2, August 19958. Journal of Economic Perspectives, Summer 1998, 2 Symposia9. *Liu, J. & J. Diamond, (2005), “China’s Environment in a Globalizing World”,

Nature, 435/3010. *McKay, S., Pearson, M. & S. Smith, (1990), “Fiscal instruments in

environmental policy”, Fiscal Studies, 11:4, 1-2011. *OXREP, (Dec 1998), Environmental Policy, (Assessment)12. Pearce, D. & D. Moran, (1994), 'The Economic Value of Biodiversity', Earthscan13. *Pearce, D., (2003), “Environmental Market Creation: Saviour or Oversell”,

Portuguese Economic Journal14. *Smith, S., (1992), “Taxation and the Environment: A Survey”, Fiscal Studies,

13:4, 21-57

The following websites might be of help with empirics:1. The Institute for European Environmental Policy (IEEP) http://www.ieep.org.uk/2. The Office of Environmental Policy and Compliance http://www.doi.gov/oepc/3. The University of Delaware Center for Energy and Environmental Policyhttp://ceep.udel.edu/ceep.html

ClassQuestions

1. What is the difference between economic optimality and sustainability?2. How would you measure sustainability?3. Should the polluter always pay?4. In carrying out a CBA study, how should (a) distorted prices; (b) non-market

goods, and (c) future costs and benefits be treated?

EssayTopics

1. Can problems of externalities affecting future generations be solved by theappropriate allocation of property rights?

2. What practical problems arise in implementing economic solutions to local andglobal externality problems?

3. "Market-based solutions to environmental problems are appealing in theory butunsatisfactory in practice". Discuss.

4. Why do we not see more use of economic instruments such as emissions taxesand tradeable permits?

5. Are current policies for dealing with climate change optimal?6. Can sustainability be justified as an environmental objective?7. Should the government use price or quantity controls in the presence of

environmental externalities?8. Should different discount rates be used in analysing different types of

environmental problem?9. "Since there is such scientific uncertainty about global warming, it is

unreasonable to take any drastic policy steps" Do you agree?10. To what extent do tradable permits offer a practical solution to externality

problems, national and international?11. How should biodiversity be valued?12. “Environmental taxes protect the environment and provide revenue. This revenue

can then be used to lower distortionary taxes elsewhere in the economy. Hence,an environmental tax should be set above marginal external cost”. Do you agreewith this argument?

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

ENVIRONMENTAL ACCOUNTING&

COST-BENEFIT ANALYSIS

KeyTopics

Sources of Breakdown of the free enterprise market system and policyfoundations in welfare economics; Valuation when markets are incomplete

Market failure & revelation mechanisms Distributional & efficiency issues:

Social versus private discount rates Discounting for risk & uncertainty Intergenerational effects Precautionary motives, prudence, saving behaviour The role of time inconsistency, addiction, procrastination &

instantaneous gratification The theory of the second best Psychology and economics; experimental evidence (exponential and hyperbolic

discounting)

Readings Books1. Atkinson, A. B. & J. E. Stiglitz, (1980), Lectures on Public Economics,

McGraw-Hill, Lectures 1, 9, 11

2. Balch, M., McFadden, D. and S. Wu, (eds), (1974), Economic Behaviourunder Uncertainty, North Holland

3. *Boadway, R. W. & N. Bruce, (1984), Welfare Economics, Blackwell, ch 10

4. Brown, C.V. & P.M. Jackson, (1990), Public Sector Economics, Blackwell, ch 8

5. ***Common, M. & Stagl S., (2012), Ecological Economics, CUP, chs12, 13, 14

6. *Cullis, J. & P. Jones,(1998), Public Finance and Public Choice, chs 2, 3

7. Dasgupta, A. K. & D. w. Pearce, (1972), Cost-Benefit Analysis: Theory andPractice, Macmillan, parts 1, 2

8. Dinwiddy, C. & F. Teal, (1995), Principles of Cost-Benefit Analysis forDeveloping Countries

9. **Dreze, J. & N. H. Stern, (1987), “The Theory of Cost-Benefit Analysis” inAuerbach, A. J. & M. S. Feldstein, (eds), Handbook of Public Economics, vol.II, North-Holland

10.Jones-Lee, M.W., (1989), The Economics of Safety and Physical Risk, MartinRobertson

11.*Layard, R. & S. Glaister, (eds), (1994), Cost-Benefit Analysis, 2nd edn

12.*Little, I. M. D., (2002), A Critique of Welfare Economics, OUP, chs VII-XI

13.Myles, G.D., (1995), Public Economics, Cambridge Univ. Press, pp 319-347

14.*Ng, Y.K., (1979), Welfare Economics, chs 7, 8

15.*Winch, D., (1986), Analytical Welfare Economics, Penguin, chs 2-4

Papers16.*Brekke, K.A., (1997), “The Numeraire Matters in Cost-Benefit Analysis,

Journal of Public Economics, vol 64, no 1, pp 117-123

17.*Little, I.M.D. & J. A. Mirrlees, (1990), “Project Appraisal and PlanningTwenty Years On”, Proceedings of the World Bank Annual Conference,supplement to The World Bank Economic Review and The World Bank ResearchObserver, pp 351-395

18.*Mirrlees, J. A., "Notes on Welfare Economics, Information and Uncertainty" inPollak, R.A., (1998), Imagined Risks and Cost-Benefit Analysis, AmericanEconomic Review, P&P, May, pp 376-380

EssayTopics

1. For both road and rail passengers, higher expenditures on safety would reducethe risks of death or injury. How might cost-benefit analysis help in decidinghow much should be spent in each case?

2. Can it ever be appropriate to require a lower rate of return from public thanfrom private investment?

3. How much should a firm spend on safety in order to save one life? Should theNational Health Service spend this same amount in order to save a life?

4. "Allowing for environmental impact in cost-benefit analysis poses specialproblems for choosing the discount rate". Does it?

5. In what circumstances, if any, should the discount rate prescribed for publicsector projects be equal to the rate of return available on private sectorinvestment?

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

UNCERTAINTY & RISK

KeyTopics

1. Modeling and measurement of risk & uncertainty in economics

2. The theory of expected utility (J. von Neumann-O. Morgenstern):

i. assumptions and their violations

ii. experimental evidence

3. The Paradoxes of Allais and Ellsberg

4. Non-expected utility theory approaches: Similarity Theory, Prospect Theory,Regret Theory, Austrian Approach, Stochastic Expected Utility

5. Uncertainty & Stochastic Dominance: 1st & 2nd degree

6. Risk Aversion and Prudence and their importance in consumption theory,precautionary savings and financial markets

Introductory&IntermediateLevel Texts

1. *Besanko & Braeutigam, Microeconomics: an Integrated Approach, ch 152. *Binmore, Fun and Games, ch 33. *Gravelle & Rees, Microeconomics, (3rd edn), chs 19, 204. *Hausman & McPherson, Economic Analysis & Moral Philosophy, chs 3-55. Hausman, The Inexact & Separate Science of Economics, ch 126. *Hirshleifer & Riley, The Analytics of Uncertainty and Information, ch 17. Hollis, The Philosophy of Social Science, chs 7, 118. Katz & Rosen, H., Microeconomics, ch 69. Knowles, Political Philosophy, chs 2, 3, 410. Koutsoyiannis, Modern Microeconomics, ch 1111. *Nicholson, Microeconomic Theory, ch 912. Perloff, Microeconomics (2nd edn) ch 1713. Sen & Williams (ed), Utilitarianism and Beyond, chs Intro, 4, 9, 10

Relevant Public Economics Books1. Bailey, Public Sector Economics, (2nd edn), ch 92. *Barr, The Economics of the Welfare State, (3rd edn), chs 5, 83. Barr, The Welfare State as a Piggy Bank, parts 1, 24. Cullis & Jones, Public Finance and Public Choice, chs 6, 7.5, 9.3

A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: aDictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: aDictionary of Economics, (8 vols), 2nd edn. See entries Uncertainty, Risk, RiskAversion, Choice under Uncertainty, Agency Problems, Expected Utility Hypothesis,Allais Paradox, Ellsberg Paradox, Non-Expected Utility Theory etc.

FurtherReading(Advanced)

BOOKS1. *Cowell, Microeconomics, ch 82. **Camerer, Loewenstein & Rabin, (eds), Advances in Behavioural Economics,

chs 3-7 & 173. **Dantine & Donaldson, Intermediate Financial Theory, 2nd edn, parts I & II4. Hahn (ed), The Economics of the Missing Markets, see papers by M. Bray & M.

Machina5. **Kagel & Roth, Handbook of Experimental Economics, parts 1, 86. Jehle & Reny, Advanced Microeconomic Theory, ch 2.47. Mas-Colell, Whinston & Greene, Microeconomic Theory, chs 6, 198. Mongin, P., “Expected Utility Theory”, in Davis, J., Hands, W. & U. Maki, (eds),

Handbook of Economic Methodology, Edward Elgar, 1997, pp 342-3509. **Silberberg & Suen, The Structure of Economics: a Mathematical Analysis, 3rd

edn, ch 13

10. *Van Zandt, Introduction to the Economics of Information, chs 1-5 of manuscriptin preparation, made available courtesy of author, see :

http://www.economics.ox.ac.uk/intra/Under/Options/EcTheory/TVZndtEconInfobook.pdf

11. **Varian, Microeconomic Analysis, 3rd edn, ch 1112. **Wolfstetter, Topics in Microeconomics, part II

PAPERS1. Blavatskyy, P. R., “A Stochastic Expected Utility Theory”, IERE, Univ. of Zurich,

WP 231, 20052. Buschena, D. & D. Zilberman, “Performance of the Similarity Hypothesis

Relative to Existing Models of Risky Choice”, Journal of Risk and Uncertainty, 11,pp 233-262, 1995

3. Buschena, D. & D. Zilberman, “Testing the Effects of Similarity on Risky Choice:Implications for Violations of Expected Utility”, Theory and Decision, 46, pp 251-276, 1999

4. Diamond, P.A., "The Role of a Stock Market in a General Equilibrium Model withTechnological Uncertainty", American Economic Review, 1967

5. Gilboa, I., Postlewaite, A. W. & D. Schmeidler, “Probability andUncertainty in Economic Modeling”, JEP, 22, 3, pp 173–188, 2008

6. Kahnemann, D. & Tversky, A., "Prospect Theory: An Analysis of Decision underRisk", Econometrica, 1979

7. Kirzner, I., “Entrepreneurial Discovery and the Competitive Market Process: anAustrian Approach”, Journal of Economic Literature, 1997

8. Machina, M., "Choice under Uncertainty: Problems Solved and Unsolved", Journalof Economic Perspectives, 1987

9. Quiggin, J., "A Theory of Anticipated Utility", Journal of Economic Behaviour andOrganisation, 1982

10.Starmer, "Developments in Non-Expected Theory: The Hunt for a DescriptiveTheory of Choice under Risk", Journal of Economic Literature, 2000

Practice 1. De Meza & Osborne, Problems in Price Theory, ch 4

2. Varian and Bergstrom, Workout Book…, quiz 12, 13

EssayTopics

1. Does expected utility theory provide a satisfactory model of decision-making underuncertainty? What is the theoretical and empirical account of it?

2. When does expected utility theory provide a good explanation of behaviour in thepresence of risk? In what ways can a market system be said to allocate riskefficiently? What is meant by the concept of risk aversion? Is there a good way tomeasure it? What determines the cost of risk?

3. Discuss the significance for economics as a whole of the paradoxes of Allais andEllsberg. How limited are they given that they involve payoffs that are out of theordinary and probabilities close to 0 and 1?

4. What is the difference between risk and uncertainty? Does experimental evidenceshed light on how the theory of choice under uncertainty needs to be modified?

5. Analyse the structure and methodology of the various Non-Expected UtilityTheories. How convincing are they?

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

OPTIMAL ENVIRONMENTAL TAXATION 1

Key Topics 1. Marginal Productivity Theory2. Microeconomics of taxation and labour supply,

Dimensions examined: hours, intensity of effort, training and choice ofoccupation, participation and retirement

Average vs marginal tax rates3. Modeling taxes, benefit programmes, fixed costs of working & the individual budget

constraint4. Individual versus household5. Incentive effects of income tax6. Optimal linear income taxation7. Evidence on labour supply and an empirical assessment:

Overview of institutions Incentives, contractual enforceability & co-ordination Experimental evidence Econometric evaluation

8. The effectiveness of tax-based active labour market policies

Introductory&IntermediateLevel Texts

1. *Bailey, Public Sector Economics, 2nd edn, chs 4, 10

2. *Cullis & Jones, Public Finance and Public Choice, chs 7, 15, 16

3. *Hindricks & Myles, Intermediate Public Economics, ch 15

4. Leach, A Course in Public Economics, chs 16-17

5. Nicholson, Microeconomic Theory, 7th edn, chs 9, 10

6. Perloff, Microeconomics, 2nd edn, chs 15, 19, 20

7. *Stiglitz, Economics of the Public Sector, 3rd edn, chs 17-22

8. Varian, Intermediate Microeconomics, 6th edn, ch 12

9. **Ehrenberg & Smith, Modern Labor Economics, 6th edn, pp 180-218

A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: aDictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: aDictionary of Economics, (8 vols), 2nd edn. See related entries Insurance, AsymmetricInformation, Adverse Selection, Moral Hazard, Human Capital etc.

FurtherReading(Advanced)

Books1. **Atkinson, A.B. & J.E. Stiglitz, (1980), Lectures in Public Economics, McGraw-

Hill, chs 2, 13

2. Auerbach, A. & M. Feldstein, (2002), The Handbook of Public Economics, vol 4,chapter on Labor Supply Effects of Taxation

3. *Eissa, N., (1996), “Tax Reforms and Labour Supply”, in J.M. Poterba, TaxPolicy and the Economy, 10, MIT Press, pp 125-135

4. Jehle, G.A. & P.J. Reny,( 2001), Advanced Microeconomic Theory, 2nd edn,Addison Wesley Longman, ch 8

5. **Myles, G., (1997), Public Economics, CUP, ch 5

6. *Varian, H., (1992), Microeconomic Analysis, 3rd edn, Norton, ch 20

Papers1. *Bitsakakis, G., (2017), “Taxation, Welfare and Distributive Justice” , Oxford

2. *----------------, (2017), “Optimal Taxation from an Efficiency and a DistributivePoint of View” , Oxford

3. **---------------, (2017), Notes on Direct Taxation, Oxford

4. *Blundell, R., (1992), "Labour Supply and Taxation: a Survey", Fiscal Studies, 13(3), pp 15-40

5. *Blundell, R. & T. MacCurdy, (1999), "Labour Supply: a Review of AlternativeApproaches", IFS WP98/18 (http://www1.ifs.org.uk/staff/bm180899.pdf),

forthcoming in O. Ashenfelter & D. Card, Handbook of Labor Economics, vol 3,Elsevier

6. *Blundell, R., Duncan, A. & C. Meghir, (1998), "Estimating Labour SupplyResponses Using Tax Reforms", Econometrica, 66, pp 827-862

7. Bosworth, B. and G. Burtless, (1992) "Effects of Tax Reform on Labor Supply,Investment and Savings", Journal of Economic Perspectives, 6 (1), Winter

8. Hausman, J., (1981), “Labour Supply. How Taxes Affect Economic Behaviour” inH. Aaron & J. Pechman,(eds), Tax and the Economy, Brookings Institution,Washington DC

9. *Heady, C., (1993), "Optimal Taxation as a Guide to Policy: a Survey" FiscalStudies, 14 (1), 15-41

10.MacCurdy, T. E., (1992), "Work Disincentive Effects of Taxes: a Re-examinationof Some Evidence", American Economic Review Papers and Proceedings, May

11.MacCurdy, T. E., Green, D. & H Paasch, (1990), “Assesing EmpiricalApproaches for Analyzing Taxes and Labour Supply”, J of Human Resources, 25,pp 415-90

ClassQuestions

1. Outline the basic structure of the marginal productivity theory.2. What are the effects of proportional, progressive & regressive taxation on labour

supply & labour force participation?3. How do we incorporate benefit programmes & fixed costs in the analysis of the

individual’s decision to work and the labour market?

EssayTopics

1. Outline the considerations in determining the optimal linear income tax. Are thereany bounds on how high the optimal rate can rise?

2. What principles ought to govern the determination of the marginal rate of incometax? Should marginal income tax rates rise with income?

3. "The disincentive effect of income tax on labour supply has been over-emphasized". Do you agree?

4. "Assess the distributional consequences of lowering the marginal rate of incometax for low income households".

5. "If inequality in the distribution of pre-tax income is increasing, the tax and publicexpenditure system should become more re-distributional".

6. "If inequality in the distribution of pre-tax income is increasing, the efficiency costof a re-distributional tax and public expenditure system will increase as well, sothe system should become less re-distributional". Adjudicate.

ENVIRONMENTAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@economics.ox.ac.uk

OPTIMAL ENVIRONMENTAL TAXATION 2

Key Topics Duality theory in consumer choice

Ramsey taxation; Inverse elasticity rule

Optimal Taxation

Criteria: efficiency, equity, other considerations

The Corlett & Hague rule

Distributional considerations

Environmental Taxation in the presence of Fiscal Unification and/or TaxHarmonisation

Introductory&IntermediateLevel Texts

1. *Bailey, Public Sector Economics, 2nd edn, chs 4, 102. **Cullis & Jones, Public Finance and Public Choice, chs 8, 15, 163. *Hindricks & Myles, Intermediate Public Economics, ch 144. Leach, A Course in Public Economics, chs 16-175. *Stiglitz, Economics of the Public Sector, 3rd edn, ch 20

A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: aDictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: aDictionary of Economics, (8 vols), 2nd edn. See entries on Optimal Taxation etc.

FurtherReading(Advanced)

Books1. *Andreoni, J., Erard, B. & J. Feinstein, (1998), “Tax Compliance”, JEL, 36, pp

818-860

2. **Atkinson, A.B. & J.E. Stiglitz, Lectures in Public Economics, McGraw-Hill,1980, chs 12, 14

3. *Auerbach, A. & M. Feldstein, (2002), The Handbook of Public Economics, vol4, chapter on Optimal Taxation

4. Bradford, D., (1986), Untangling Income Tax, Harvard Univ. Press

5. *Cowell, F. A., (1990), Cheating the Government, MIT Press, chs 4 & 8

6. Kaldor, N., (1955), An Expenditure Tax, Allen and Unwin

7. Kay, J. & M. King, (1990), The British Tax System, 5th edn, OUP, chs 2, 3, 5, 6, 7

8. *Leape, J., (1993), “Tax Policies in the 1980s and 1990s: the Case of the UK” inA. Knoester (ed), Taxation in the US & Europe: Theory & Practice

9. Meade Report, (1978), The Structure and Reform of Direct Taxation, IFS, chs 7-10

10.**Myles, G., (1997), Public Economics, CUP, chs 4, 5 & 12

11.Pechman, (ed.), (1980), What Should be Taxed, Income or Expenditure?Brookings papers by Goode, Bradford, Graetz

12.*Roberts, K., (2000), “A Reconsideration of the Optimal Income Tax”, inHammond and Myles, (eds), Essays in Incentives and Organization, OUP

13.Stern, (1987), ‘The Theory of Optimal Commodity and Income Taxation: AnIntroduction’, in Newbery and Stern, (eds), The Theory of Taxation forDeveloping Countries, OUP

Papers1. *AER Papers and Proceedings, Prospects for Fundamental Tax Reform, May1997,

pp 138-155 (papers by Hubbard, Auerbach, Hall & Slemrod)2. *Auerbach, A. & J. R. Hines, (2001), “Taxation & Economic Efficiency”, NBER,

WP 8181, March3. *Bitsakakis, G., (2017), “Optimal Taxation from an Efficiency and a Distributive

Point of View”, Oxford4. **---------------, (2017), Notes on Indirect Taxation, Oxford5. Diamond & Mirrlees, (1971),‘Optimal Taxation & Public Production’, AER

6. *Heady, (1993), “Optimal Taxation as a Guide to Policy: A Survey”, FiscalStudies, vol 14, no 1, pp 15-41

7. *Sandmo, (1976), ‘Optimal taxation: an Introduction to the Literature’, Journal ofPublic Economics

8. Saez, (2000), “Using Elasticities to Derive Optimal Income Tax Rates”, RES9. Zodrow, G., (1995), “Taxation, Uncertainty and The Choice of a Consumption Tax

Base”, Journal of Public Economics, vol 58 no 2, pp 257-266

Class Questions 1. Outline the basic proof of the Ramsey Rule. Is it applicable?2. In what sense can we identify optimal taxation rules?3. How is the positive theory of optimal taxation different from the normative one?

EssayTopics

1. "Commodity taxes in practice tend to be broadly uniform. This suggests that thereis scope for improvement." Do you agree?

2. "When lump sum taxation of individuals is possible, the best system of commoditytaxes is not to have any at all. When everyone is identical, there are noimpediments to lump sum taxes. Thus the Ramsey rule for commodity taxation isredundant." Discuss.

3. "If the main goal of the indirect tax system is redistribution in favour of the poor,then luxuries ought to be taxed at a higher rate than necessities." Discuss.

4. "The best system of indirect taxation is the simplest: impose the tax on allexpenditure at the same rate and allow no exceptions". Discuss.

5. Should we tax commodities when it is possible to tax individuals?

ENVIRONMETAL ECONOMICSGeorge Bitsakakis

University of OxfordEmail: George.Bitsakakis@ economics.ox.ac.uk

ENVIRONMENT & GROWTH

KeyTopics

The Kaldor Stylised Facts of Economic Growth The Classics: The neoclassical aggregate production function; the Harrod problem;

the Harrod-Domar model; the “knife edge problem”; re-switching of techniques;the Cambridge-Cambridge controversies in the theory of Capital; the Solowmodel; technological progress & population growth, total factor productivity andgrowth accounting; steady state and the Golden Rule steady state; comparativestatics; transition dynamics; the rate of convergence; broad capital; the Solowmodel with human capital

Endogenous Growth: The Romer AK model, the Lucas human capital growthmodel; product varieties; quality ladders; ideas-based growth; scale and growth;openness and growth; aggregate/effective demand and growth; overlappinggenerations models of growth

New Growth Evidence: Development as freedom; TFP; R&D accounting; standingon shoulders; concepts of convergence; Galton's fallacy; democracy and growth

Productivity and Competitiveness: evidence and policy, competitiveness and theterms of trade; the real exchange rate; UK manufacturing TFP growth; UK relativeTFP; foreign direct

Energy, Growth & Development Growth & the Environment

BasicReading

1. Blanchard, O-J, Macroeconomics, chs 10-13, 3rd edn, Prentice Hall, 20032. Burda, M. & C. Wyplosz, Macroeconomics: a European Text, ch 3, 3rd edn, OUP,

20013. *Carlin & Soskice, Macroeconomics, chs 13, 14

4. **Common, M. & S. Stagl, (2012), Ecological Economics, CUP, chs 6, 75. Gylfason, T., Principles of Economic Growth, OUP, 19996. *Jones, H., Modern Theories of Economic Growth, chs 1-7, Nelson, 19757. *Jones, C. I., Introduction to Economic Growth, 2nd edn, Norton, 20028. Mankiw, N-G, Macroeconomics, chs 7, 8, 5th edn, Worth, 20039. Miles, D & A. Scott, Macroeconomics, chs 5-7, Wiley, 200210. *Solow, R., Growth Theory, 2nd edn, OUP, 2000

A useful source is always, Eatwell, Milgate & Newman, The New Palgrave: aDictionary of Economics, (4vols) and Blume & Durlauf, (eds), The New Palgrave: aDictionary of Economics, (8 vols), 2nd edn. See entries: Growth Theory, EndogenousGrowth, Technical Change, Capital Theory and other ones related.

FurtherReading

Books1. Barro, R. & J. Sala-I-Martin, Economic Growth, 2nd edn, McGraw-Hill, 20042. *Bitsakakis, G., Lecture Notes on Open Economy Macroeconomics, Oxford,

2017, chs 12, 133. Hicks, J., Capital & Growth, OUP, 19654. Keynes,J.M., The General Theory of Employment, Interest & Money, MacMillan,

19365. *Romer, D., Advanced Macroeconomics, chs 1-3, 3rd edn, McGraw Hill, 20066. *Scarth, W., Macroeconomics, ch 11, 2nd edn, Dryden Press, 1996

Papers1. Aghion et al, ‘Inequality and Economic Growth: The Perspective of the New

Growth Theories’, JEL, Dec 19992. Aghion & Howitt, ‘A Model of Growth Through Creative Destruction’,

Econometrica, 60, pp 323-51, 19923. Cameron, G., 'Innovation and Economic Growth', 1996, LSE Centre for Economic

Performance, Discussion Paper 2774. Grossman G. & E. Helpman, ‘Endogenous Innovation in the Theory of Growth’,

JEP, 19945. Helpman, E., “Innovation, Imitation and Intellectual Property Rights,

Econometrica, 19936. Jones, C. I., ‘Growth: With and Without Scale Effects’, AER, Papers &

Proceeedings, 19997. King & Levine, ‘Finance and Growth: Schumpeter Might be Right’, QJE, 19938. Levine, ‘Financial Development and Economic Growth’, JEL, June 19979. Mankiw, N.G., Romer, P. & D. Weil, "A Contribution to the Empirics of

Economic Growth", QJE, 407-37, 152, 199210. Temple, J., ‘The New Growth Evidence’, JEL, March 1999

EssayTopics

1. Do the factors which explain why countries grow at different rates explain whytheir growth rates vary over time?

2. Is growth theory of any relevance to the real world?3. ‘The main contribution of “endogenous growth theory” is to have reconciled the

neoclassical theory of factor pricing with increasing returns’. Discuss.4. ‘Because knowledge is an international commodity I should expect the

contribution (to growth) of advances in knowledge … to be of about the same sizein all countries’. (Denison, 1967). Discuss.

5. ‘Except under very special circumstances, endogenous growth theory eitherpredicts explosive growth or convergence to a neo-classical steady state’. Discuss.

6. ‘Supply side policies can raise the level of output but not the underlying trend rateof growth’. Do you agree?

7. How far can the shortcomings of the Solow neoclassical growth model beovercome by alternative models of economic growth?

8. A rise in the share of savings in GDP leads to a higher share of investment.Therefore, it will lead to higher consumption per head’. Do you agree?

9. What effect does devoting a greater share of GDP to human capital have on thelevel and growth rate of output?

10. Compare & contrast the structure, findings and empirical relevance of Harrod-Domar, Solow, Romer, Lucas & Uzawa models of economic growth.