Lecture 1: Intro: Public Econ and the Tax & Transfer

System

Stefanie Stantcheva

Fall 2019

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 Our Goals for this class

1 Learn skills and methods (theory and empirical).

2 Create a culture of key papers and read widely.
3 Get you inspired and ready for your own research.

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 Class Logistics

Meet twice per week, 1 hour 15 mins.

Regular schedule except classes from 10/23 and 10/30 replaced with a
2.5 hour block on 11/8, 9-11:30 am.
One problem set.
One final exam.
Office hours posted on Ec2450A OH link on my website.
What I expect from you.

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 My research:

I study the taxation of firms and individuals. I focus on three main issues:

1) The long-run effects of taxes on innovation, education & training, and

wealth. How can we design the tax system to foster innovation?

2) The determinants of our social preferences, attitudes, and perceptions,

which ultimately drive support for redistribution. To answer this, I conduct
large-scale online surveys and experiments.

3) The effects of taxes in imperfect markets with informational frictions and

rents.

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 PUBLIC ECONOMICS DEFINITION

Public economics = Study of the role of the government in the economy

Government is instrumental in most aspects of economic life:

1) Government in charge of huge regulatory structure

2) Taxes: governments in advanced economies collect 30-50% of National

Income in taxes

3) Expenditures: tax revenue funds traditional public goods (infrastructure,

public order and safety, defense), and welfare state (education, retirement
benefits, health care, income support)

4) Macro-economic stabilization through central bank (interest rate,

inflation control), fiscal stimulus, bailout policies

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 Figure 13.1. Tax revenues in rich countries, 1870-2010
60%

50% Sweden
Total tax revenues (% national income)

France
40%

U.K.

30%
U.S.
,

20%

10%

0%
1870 1890 1910 1930 1950 1970 1990 2010
Total tax revenues were less than 10% of national income in rich countries until 1900-1910; they represent between
30% and 55% of national income in 2000-2010. Sources and series: see piketty.pse.ens.fr/capital21c.

Source: Piketty (2014)

 Bigger view on government

Economists have a narrow minded view of individual behavior: selfish,

rational, and utility based on own consumption only

But social interactions are critical for humans: we naturally cooperate at

many levels: families, communities, nation states, global treaties

Governments are a formal way to organize cooperation

Archaic human societies depended on social cooperation for protection and

taking care of the young, sick, and old

⇒ Explains best why our modern nation states have defense and provide
education, health care, and retirement benefits

Replacing social institutions by markets does not always work

E.g., Retirement benefits: Saving for your own retirement is economically rational
but in practice most people unable to do so unless institutions
(employers/government) help them 7 41
 For Economists: Two General Rules for Government Intervention

1) Failure of 1st Welfare Theorem: Government intervention can help if

there are market or individual failures. Markets first, government second.
Why?

2) Fallacy of the 2nd Welfare Theorem: Distortionary Government

intervention is required to reduce economic inequality

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 Role 1: 1st Welfare Theorem Failure

1st Welfare Theorem: If (1) no externalities, (2) perfect competition, (3)

perfect information, (4) agents are rational, then private market equilibrium
is Pareto efficient

Government intervention may be desirable if:

1) Externalities require government interventions (Pigouvian

taxes/subsidies, public good provision)

2) Imperfect competition requires regulation (typically studied in Industrial

Organization)

3) Imperfect or Asymmetric Information (e.g., adverse selection may call for

mandatory insurance)

4) Agents are not rational (= individual failures analyzed in behavioral

economics, field in huge expansion): e.g., myopic or hyperbolic agents may
not save enough for retirement
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 1. Externalities

Markets may be incomplete (e.g., smoking, pollution).

Achieving the Coasian efficient solution requires a coordinating institution,

such as a government.

Public goods (infrastructure, defense, education).

Important question: what public goods to provide, how to correct for

externalities.

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 2. Imperfect competition

Role for government regulation when markets are not competitive.

We will see some of this when we study R&D policies and innovation.

Typically we leave this to IO, but we shouldn’t!

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 3. Imperfect and asymmetric information

Adverse Selection in health insurance (reason for mandated coverage).

Capital markets and credit constraints (subsidies for education).

Intergenerational issues (future generations may not be valued

appropriately in today’s market).

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 4. Individual Failures

Behavioral issues, own-agency problems.

If agents do not optimize, may be best to intervene. E.g.: mandated

retirement savings.

Paternalism?

Currently very active area of research, theoretically and empirically.

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 Individual Failures vs. Paternalism

In many situations, individuals may not or do not seem to act in their best
interests [e.g., many individuals are not able to save for retirement]

Two Polar Views on such situations:

1) Individual Failures [Behavioral Economics View] Individual Failures

exist: Self-control problems, Cognitive Limitations

2) Paternalism [Libertarian Chicago View] Individual failures do not exist

and govt wants to impose on individuals its own preferences against
individuals’ will

Key way to distinguish those 2 views: Under Paternalism, individuals

should be opposed to govt programs such as Social Security. If individuals
understand they have failures, they will tend to support govt programs such
as Social Security.
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 Role 2: 2nd Welfare Theorem Fallacy

Even with no market failures, free market might generate substantial

inequality. Inequality is an issue because of people care about their
relative situation.

2nd Welfare Theorem: Any Pareto Efficient outcome can be reached by (1)
Suitable redistribution of initial endowments [individualized lump-sum
taxes based on indiv. characteristics and not behavior], (2) Then letting
markets work freely

⇒ No conflict between efficiency and equity [1st best taxation]

Redistribution of initial endowments is not feasible (information pb) ⇒ govt

needs to use distortionary taxes and transfers ⇒ Trade-off between
efficiency and equity [2nd best taxation]

This class will focus on both roles, but first on 2).

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 Illustration of 2nd Welfare Theorem Fallacy

Suppose economy is populated 50% with disabled people unable to work

(hence they earn $0) and 50% with able people who can work and earn
$100

Free market outcome: disabled have $0, able have $100

2nd welfare theorem: govt is able to tell apart the disabled from the able
[even if the able do not work]

⇒ can tax the able by $50 [regardless of whether they work or not] to give $50 to
each disabled person ⇒ the able keep working [otherwise they’d have zero
income and still have to pay $50]

Real world: govt can’t tell apart disabled from non working able

⇒ $50 tax on workers + $50 transfer on non workers destroys all incentives to
work ⇒ govt can no longer do full redistribution ⇒ Trade-off between equity and
size of the pie
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 Normative vs. Positive Public Economics

Normative Public Economics: Analysis of How Things Should be (e.g.,

should the government intervene in health insurance market? how high
should taxes be?, etc.)

Positive Public Economics: Analysis of How Things Really Are (e.g., Does
govt provided health care crowd out private health care insurance? Do
higher taxes reduce labor supply?)

Positive Public Economics is a required 1st step before we can complete

Normative Public Economics

Positive analysis is primarily empirical and Normative analysis is primarily

theoretical

Positive Public Economics overlaps with Labor Economics

Political Economy is a positive analysis of govt outcomes [public choice is

political economy from a libertarian view]
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 Govt Redistribution with Taxes and Transfers

Government taxes individuals based on income and consumption and

provides transfers: z is pre-tax income, y = z − T (z ) + B (z ) is post-tax
income

1) If inequality in y is less than inequality in z ⇔ tax and transfer system

is redistributive (or progressive)

2) If inequality in y is more than inequality in z ⇔ tax and transfer system

is regressive

a) If y = z · (1 − t ) with constant t, tax/transfer system is neutral

b) If y = z · (1 − t ) + G where G is a universal (lumpsum) allowance, then

tax/transfer system is progressive

c) If y = z − T where T is a uniform tax (poll tax), then tax/transfer system is

regressive

Current tax/transfer systems in rich countries look roughly like b)

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 US Distributional National Accounts

Piketty-Saez-Zucman NBER’16 distribute both pre-tax and post-tax US

national income across adult individuals

Pre-tax income is income before taxes and transfers

Post-tax income is income net of all taxes and adding all transfers and
public good spending

Both concepts add up to national income and provide a comprehensive

view of the mechanical impact of government redistribution

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 National Income Distribution 2014 from Piketty, Saez, and Zucman NBER '16
Pre-tax income Post-tax income

Average Average
Income group Number of adults Income share Income share
income income

Full Population 234,400,000 $64,600 100% $64,600 100%

Bottom 50% 117,200,000 $16,200 12.5% $25,000 19.4%
Middle 40% 93,760,000 $65,400 40.5% $67,200 41.6%
Top 10% 23,440,000 $304,000 47.0% $252,000 39.0%
Top 1% 2,344,000 $1,300,000 20.2% $1,010,000 15.6%
Top 0.1% 234,400 $6,000,000 9.3% $4,400,000 6.8%
Top 0.01% 23,440 $28,100,000 4.4% $20,300,000 3.1%
Top 0.001% 2,344 $122,000,000 1.9% $88,700,000 1.4%
 Top 10% national income share: pre-tax vs. post-tax
50%

Pre-tax
45%
% of national income

40%

35%

30%
Post-tax (after taxes and adding
transfers and govt spending)
25%
1917
1922
1927
1932
1937
1942
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
2017
Source: Piketty, Saez, Zucman (2018)
 US tax/transfer System: Progressivity and Evolution

0) US Tax/Transfer system is progressive overall: pre-tax national income

is less equally distributed than post-tax/post-transfer national income

1) Medium Term Changes: Federal Tax Progressivity has declined since

1970 but govt redistribution through transfers has increased (Medicaid,
Social Security retirement, DI, UI various income support programs)

2) Long Term Changes: Before 1913, US taxes were primarily tariffs,

excises, and real estate property taxes [slightly regressive], minimal welfare
state (and hence small govt)

http:
//www.treasury.gov/education/fact-sheets/taxes/ustax.shtml

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 The macro rate of tax rose until the
1960s and has been constant since then
Macroeconomic tax rate
(Federal + State + local)
45%

40%

35%
% of national income

Macroeconomic tax rate

30%

25%

20%

15%

10%

5%

0%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
Source: Appendix Table II-G1.

Source: Piketty, Saez, Zucman (2016)

 Tax progressivity has declined since the
1960s
Average tax rates by pre-tax income group

45%

40%

35%
% of pre-tax income

Top 1%
30% All
25%

20%

15% Bottom 50%

10%

5%

0%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
Source: Appendix Table II-G1.

Source: Piketty, Saez, Zucman (2016)

 Federal US Tax System: Overview

1) Individual income tax (on both labor+capital income) [progressive](40% of

fed tax revenue)

2) Payroll taxes (on labor income) financing social security programs [about
neutral] (40% of revenue)

3) Corporate income tax (on capital income) [progressive if incidence on

capital income] (15% of revenue)

4) Estate taxes (on capital income) [very progressive] (1% of revenue)

5) Minor excise taxes (on consumption) [regressive] (3% of revenue)

Fed agencies (CBO, Treasury, Joint Committee on Taxation) and think-tanks

(Tax Policy Center) provide distributional Fed tax tables

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 State+Local Tax System: Overview

Decentralized governments can experiment, be tailored to local views,

create tax competition and make redistribution harder (famous Tiebout
1956 model) hence favored by conservatives

1) Individual + Corporate income taxes [progressive] (1/3 of state+local tax

revenue)

2) Sales taxes + Excise taxes (tax on consumption) [regressive] (1/3 of

revenue)

3) Real estate property taxes (on capital income) [slightly progressive] (1/3
of revenue)

See ITEP (2018) “Who Pays” for systematic state level distributional tax
tables

US Census provides Census of Government data

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 TAXATION AND REDISTRIBUTION

Key question: Should government reduce inequality using taxes and

transfers?

1) Governments use taxes to raise revenue

2) This revenue funds transfer programs:

a) Universal Transfers: Education, Health Care (only 65+ in the US),

Retirement and Disability

b) Means-tested Transfers: In-kind (e.g., public housing, nutrition, Medicaid

in the US) and cash (direct welfare and refundable tax credits)

Means-tested transfers relatively small relative to universal transfers

This lecture follows Piketty and Saez ’13 handbook chapter

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Don’t Be Like This: Perception vs. Reality

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 GOAL: TAKE A LOOK AT ACTUAL TAX SYSTEM
Sometimes you are an optimal tax theorist and don’t know the actual top
tax rates – it’s weird.

You need to know institutional details. It’s not boring. It’s crucial.

You should not try to capture all institutional details in your models. But
unless you know them, you cannot argue they are second-order.
(Sometimes the devil is in the detail, sometimes not).

The tax system reflects

i) social judgements made by people and policy makers and

ii) lobbying, political economy, interest groups.

Understand the implicit social judgements behind the tax system.

Question them! Which constraints are truly “irremovable”?

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 FACTS ON US TAXES AND TRANSFERS

References: Comprehensive description in Gruber undergrad textbook

(taxes/transfers) and Slemrod-Bakija (taxes)

http://www.taxpolicycenter.org/taxfacts/

A) Taxes: (1) individual income tax (fed+state), (2) payroll taxes on earnings
(fed, funds Social Security+Medicare), (3) corporate income tax (fed+state),
(4) sales taxes (state)+excise taxes (state+fed), (5) property taxes (state)

B) Means-tested Transfers: (1) refundable tax credits (fed), (2) in-kind

transfers (fed+state): Medicaid, public housing, nutrition (SNAP), education
(3) cash welfare: TANF for single parents (fed+state), SSI for old/disabled
(fed)

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 FEDERAL US INCOME TAX

US income tax assessed on annual family income (not individual) [most

other OECD countries have shifted to individual assessment]

Sum all cash income sources from family members (both from labor and
capital income sources) = called Adjusted Gross Income (AGI)

Main exclusions: fringe benefits (health insurance, pension contributions

and returns), imputed rent of homeowners, undistributed corporate profits,
unrealized capital gains, interest from state+local bonds

⇒ AGI base is only 70% of factor national income

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 FEDERAL US INCOME TAX

Taxable income = AGI - deductions

deduction is max of standard deduction or itemized deductions

Standard deduction is a fixed amount ($12K for singles, $24K for married
couple)

Itemized deductions: (a) state and local taxes paid (up to $10K), (b)
mortgage interest payments, (c) charitable giving, various small other items

[about 10% of AGI lost through itemized deductions, called tax expenditures]

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 FEDERAL US INCOME TAX: TAX BRACKETS

Tax T (z ) is piecewise linear and continuous function of taxable income z

with constant marginal tax rates (MTR) T 0 (z ) by brackets

In 2018+, 6 brackets with MTR 10%,12%,22%,24%,32%,35%, 37% (top bracket

for z above $600K), indexed on price inflation

Lower preferential rates (up to a max of 20%) apply to dividends (since

2003), realized capital gains [in part to offset double taxation of corporate
profits].

20% of business profits are exempt since 2018

Tax rates change frequently over time. Top MTRs have declined drastically
since 1960s (as in many OECD countries)

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T(z) Individual Income Tax

slope 37%

T(z) is
continuous in z

slope
slope 12%
10%

0 taxable income z
T’(z) Marginal Income Tax

T’(z) is a 37%
step function

12%
10%

0 taxable income z
In practice...

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 2018 US Personal Income Tax Code

Rate Individuals Married Filing Jointly

10% Up to $9,525 Up to $19,050
12% $9,526 to $38,700 $19,051 to $77,400
22% $38,701 to $82,500 $77,401 to $165,000
24% $82,501 to $157,500 $165,001 to $315,000
32% $157,501 to $200,000 $315,001 to $400,000
35% $200,001 to $500,000 $400,001 to $600,000
37% over $500,000 over $600,000

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 FEDERAL US INCOME TAX: AMT AND CREDITS

Alternative minimum tax (AMT) is a parallel tax system (quasi flat tax at
28%) with fewer deductions: actual tax =max(T (z ), AMT ) (hits < 1% of
taxpayers in 2018+)

Tax credits: Additional reduction in taxes

(1) Non refundable (cannot reduce taxes below zero): foreign tax credit,
child care expenses, education credits, energy credits

(2) Refundable (can reduce taxes below zero, i.e., be net transfers): EITC
(earned income tax credit, up to $3.5K, $5.7K, $6.5K for working families
with 1, 2, 3+ kids), Child Tax Credit ($2K per kid, partly refundable)

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 FEDERAL US INCOME TAX: TAX FILING

Taxes on year t earnings are withheld on paychecks during year t

(pay-as-you-earn)

Income tax return filed in late January-April 15th, year t + 1 [filers use
either software or tax preparers, huge private industry]

Most tax filers get a tax refund as withholdings > net taxes owed

Payers (employers, banks, etc.) send income information to IRS (US tax
administration) (3rd party reporting)

Third party reporting + withholding at source is key for successful

enforcement

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 MAIN MEANS-TESTED TRANSFER PROGRAMS

1) Traditional transfers: managed by welfare agencies, paid on monthly

basis, high stigma and take-up costs ⇒ low take-up rates

Main programs: Medicaid (health insurance for low incomes), SNAP

(former food stamps), public housing, TANF (traditional welfare), SSI
(aged+disabled)

2) Refundable income tax credits: managed by tax administration, paid as

an annual lumpsum in year t + 1, low stigma and take-up cost ⇒ high
take-up rates

Main programs: EITC and Child Tax Credit [large expansion since the
1990s] for low income working families with children

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 BOTTOM LINE ON ACTUAL TAXES/TRANSFERS

1) Based on current income, family situation, and disability (retirement)

status ⇒ Strong link with current ability to pay

2) Some allowances made to reward / encourage certain behaviors:

charitable giving, home ownership, savings, energy conservation, and more
recently work (refundable tax credits such as EITC)

3) Provisions pile up overtime making tax/transfer system more and more

complex until significant simplifying reform happens (such as US Tax
Reform Act of 1986, or TCJA 2018)

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 KEY CONCEPTS FOR TAXES/TRANSFERS

1) Transfer benefit with zero earnings −T (0) [sometimes called demogrant

or lumpsum grant]

2) Marginal tax rate (or phasing-out rate) T 0 (z ): individual keeps

1 − T 0 (z ) for an additional $1 of earnings (intensive labor supply response)

3) Participation tax rate τp = [T (z ) − T (0)]/z: individual keeps fraction

1 − τp of earnings when moving from zero earnings to earnings z (extensive
labor supply response):

z − T (z ) = −T (0) + z − [T (z ) − T (0)] = −T (0) + z · (1 − τp )

4) Break-even earnings point z ∗ : point at which T (z ∗ ) = 0

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 Budget Set
𝑐= z-T(z)
after-tax
and transfer
income

slope=1-T ′ (z)

-T(0)

0 z∗ pre-tax income z
𝑐= z-T(z)

𝜏𝑝 =participation tax rate

(1 − 𝜏𝑝 )z

-T(0)

0 z
pre-tax income z
 US Tax/Transfer System, single parent with 2 children, 2009
$50,000 $50,000

Welfare:
$40,000 $40,000 TANF+SNAP

Tax credits:
Disposable arnings

$30,000 $30,000 EITC+CTC

$20,000 $20,000
Earnings after
Fed+SSA taxes

$10,000 $10,000 45 Degree Line

$0 $0
$0

$10,000

$20,000

$30,000

$40,000

$50,000
Gross Earnings (with employer payroll taxes)

Source: Federal Govt

 FAMILY TAXATION: MARRIAGE AND CHILDREN

Two important issues in policy debate:

1) Marriage: What is the optimal taxation of couples vs. singles? Should

secondary earnings be treated differently?

2) Children: What should be the net transfer (transfer or tax reduction) for
family with children (as a function of family income and structure)?

Theoretical literature is not great in part because utilitarian framework is

not satisfactory

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 TAXATION OF COUPLES

1) Economies of scale and sharing in consumption within families ⇒

Welfare best measured by family income relative to size [≡ normalized
income]

⇒ Taxes/Transfers should be based on normalized family income which can

create a marriage penalty / subsidy

Note: Impossible to have a tax/transfer system that

(1) is family income based T (z h + z w )

(2) has marriage neutrality T (z h , z w ) = T (z h ) + T (z w )

(3) is progressive (i.e., not strictly linear)

Proof: (1)+(2) ⇒ T (z h + z w ) = T (z h ) + T (z w ) ⇒ T (z ) = τ · z

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 TAXATION OF COUPLES

2) If marriage responds to tax/transfer differential ⇒ better to reduce

marriage penalty and move toward individualized system

Particularly important cohabitation is close substitute to marriage

(Scandinavian countries)

3) Labor supply of secondary earners more elastic than labor supply of

primary earner ⇒ Secondary earnings should be taxed less (standard
Ramsey intuition, Boskin-Sheshinski JpubE’83)

But labor supply elasticity differential is decreasing as earnings gender

gap decreases [Blau and Kahn JOLE’07]

In OECD countries: income tax systems have become individual based but
means tested transfers have remained family based

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 TRANSFERS OR TAX CREDITS FOR CHILDREN

1) Children reduce normalized income ⇒ Transfer for children Tkid should

be positive

In practice, transfers for children are always positive

2) Should Tkid (z ) increase with income z?

Pro: they reduce normalized income most for upper earners [e.g., France
computes taxes as N · T (z /N ) where N is # family members, kids count
as .5 ⇒ Tkid (z ) increases with z].

Cons: lower earners need child transfers most [most OECD countries have
means-tested transfers conditional on number of kids ⇒ Tkid (z ) decreases
with z, US has Tkid (z ) inverted U-shape due to EITC and Child Tax Credit]

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 TRANSFERS OR TAX CREDITS FOR CHILDREN

3) Family does not make decisions as a single unit (Chiappori JPE’92):

transfers to mothers has bigger effects on children’s consumption than
transfers to fathers [Lundberg et al. ’97, Duflo ’03]

4) Children create externalities [positive: pay-as-you-go retirement

programs, negative: global warming]. If fertility responds to transfers, case
for subsidizing/taxing children

5) Child care costs are positively related to work ⇒ Such costs should be
subsidized by Atkinson-Stiglitz [often they are in practice]:

Public pre-kindergarten in Europe is a huge in-work subsidy for mothers

⇒ Large effect on mothers’ labor force participation (bigger effect than US
EITC)

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 CHILDREN AND LIMITS OF UTILITARIAN MODEL

If fertility decisions unrelated to children tax/transfers ⇒ Social marginal

utility should be equated across families with 0 children, families with 1
child, etc.

If ability uncorrelated with children ⇒ Families with kids will get fully
compensating transfers

If ability positively correlated with children ⇒ Families with kids might be

taxed more heavily [as in the height tax case]

Seems an absurd model to think about transfers for children ⇒ Need to

come up with more realistic alternative

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 REFERENCES CITED

Alvaredo, F., Atkinson, A., T. Piketty and E. Saez “The Top 1 Percent in
International and Historical Perspective.” Journal of Economic Perspectives
27(3), 2013, 3-20. (web)

Alvaredo, F., Atkinson, A., T. Piketty, E. Saez, and G. Zucman World Inequality
Database, (web)

Alvaredo, F., Atkinson, A., T. Piketty, E. Saez, and G. Zucman. 2018 World
Inequality Report, (web)

Atkinson, A., T. Piketty and E. Saez “Top Incomes in the Long Run of History”,
Journal of Economic Literature 49(1), 2011, 30–71. (web)

Chetty, Raj, Nathan Hendren, Patrick Kline, and Emmanuel Saez, “Where is the
Land of Opportunity? The Geography of Intergenerational Mobility in the United
States,” Quarterly Journal of Economics, 129(4), 2014, 1553-1623. (web)

41
ITEP (Institute on Taxation and Economic Policy). 2018. “Who Pays: A
Distributional Analysis of the Tax Systems in All 50 States”, 6th edition. (web)

Kopczuk, Wojciech, Emmanuel Saez, and Jae Song “Earnings Inequality and
Mobility in the United States: Evidence from Social Security Data since 1937,”
Quarterly Journal of Economics 125(1), 2010, 91-128. (web)

Piketty, Thomas, Capital in the 21st Century, Cambridge: Harvard University

Press, 2014, (web)

Piketty, Thomas and Emmanuel Saez “Income Inequality in the United States,
1913-1998”, Quarterly Journal of Economics, 118(1), 2003, 1-39. (web)

Piketty, Thomas and Emmanuel Saez “How Progressive is the U.S. Federal Tax
System? A Historical and International Perspective,” Journal of Economic
Perspectives, 21(1), Winter 2007, 3-24. (web)

Piketty, Thomas, Emmanuel Saez, and Gabriel Zucman, “Distributional

National Accounts: Methods and Estimates for the United States”, Quarterly
Journal of Economics, 133(2), 553-609, 2018 (web)

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Piketty, Thomas and Gabriel Zucman, “Capital is Back: Wealth-Income Ratios in
Rich Countries, 1700-2010”, Quarterly Journal of Economics 129(3), 2014,
1255-1310 (web)

Saez, Emmanuel and Gabriel Zucman, “Wealth Inequality in the United States
since 1913: Evidence from Capitalized Income Tax Data”, Quarterly Journal of
Economics 131(2), 2016, 519-578 (web)

Tiebout, Charles M. “A Pure Theory of Local Expenditures” Journal of Political

Economy, 64(5), 1956, 416-424 (web)

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 GENERAL BOOK REFERENCES

Graduate Level

Atkinson, A.B. and J. Stiglitz, Lectures on Public Economics, New York: McGraw
Hill, 1980.

Auerbach, A. and M. Feldstein, eds., Handbook of Public Economics, 4 Volumes,

Amsterdam: North Holland, 1985, 1987, 2002, and 2002. (web)

Auerbach, A., Chetty, R., M. Feldstein, and E. Saez, eds., Handbook of Public
Economics, Volume 5, Amsterdam: North Holland, 2013 (web)

Kaplow, L. The Theory of Taxation and Public Economics. Princeton University

Press, 2008.

Mirrlees, J. Reforming the Tax System for the 21st Century The Mirrlees Review,
Oxford University Press, (2 volumes) 2009 and 2010. (web)

Piketty, Thomas, Capital in the 21st Century, Cambridge: Harvard University

Press, 2014, (web)
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 REFERENCES ON EMPIRICAL METHODS:

Angrist, J. and A. Krueger, “Instrumental Variables and the Search for

Identification: From Supply and Demand to Natural Experiments,” Journal of
Economic Perspectives, 15 (4), 2001, 69-87 (web)

Angrist, J. and Steve Pischke. Mostly Harmless Econometrics: An Empiricist’s

Companion, Princeton University Press, 2009. (web)

Bertrand, M. E. Duflo et S. Mullainhatan, “How Much Should we Trust

Differences-in-Differences Estimates?,” Quarterly Journal of Economics, Vol. 119,
No. 1, 2004, pp. 249-275. (web)

Imbens, Guido and Jeffrey Wooldridge (2007) What’s New in Econometrics? NBER
SUMMER INSTITUTE MINI COURSE 2007. (web)

Meyer, B. “Natural and Quasi-Experiments in Economics,” Journal of Business and

Economic Statistics, 13(2), April 1995, 151-161. (web)

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