78174 - Applied Public Economics

Learning outcomes

At the end of the course, students should have knowledge of the debate regarding pensions policy and how it affects individuals, a debate that interests policy and academic audiences. He/she has knowledge of the lifecycle model as a key tool for analysing the issues of interest and for understanding existing analyses. Finally student knows topical policy questions and the recent contributions to the academic literature about how individuals are affected by, and respond to, public policy.

Course contents

The course is about the economic issues in the provision of pensions, both regarding the systemic problems facing those designing pensions systems, and regarding how individuals are affected and respond to pension programmes.
As in much of the international literature, the term “social security” is loosely used interchangeably with “(public) pension provision”.

Specific topics to be covered in the course should include:  

1. Background

·        Why do we have provision for retirement, and why does the state intervene?

·        Introduction to the taxonomy of pension systems
(Tiers and pillars; Universal and targeted safety nets; Pay as You Go v. Funded; Public v. Private; Defined Contribution v. Defined Benefit; Beveridge v. Bismarck)

·        Facts and figures on pension systems – reform or bust?

·        Options for reform

·        Questions arising for the course – the impact of systems and reforms on individuals

 

2. The life-cycle model:
A framework for thinking about how individuals provide for retirement

·        Consumption smoothing – a basic model

·        A more realistic model

·        Assessments of the model

 

3. Some macroeconomic implications

Pensions in the Diamond OLG model

 

4. Measuring the offset between social security and private savings

After an introductory discussion, a critical assessment of some papers from the reading list will follow.

 

5. Can tax incentives be an effective means to encourage saving (for retirement)?

The starting point for the discussion is: what does the lifecycle model lead us to expect? The focus will be on critically assessing papers that aim to measure the effectiveness of such policies.

 

6. Are we saving “rationally” for retirement?

Some papers in this literature focus on (micro)-econometric analysis, others use an approach of structural modelling. Papers of both kinds will be discussed.

Readings/Bibliography

A full reading list will be handed out in the first class. For topic 1., useful readings are:

1. Background

Disney, Richard, 2000, “Crisis in Public Pension Programmes in OECD: What are the reform options?”, Economic Journal Features, Vol 110, No 461 (February), F1-F24

James Banks and Carl Emmerson, March 2000,  “Public and private pension spending: principles, practice and the need for reform”,  Fiscal Studies, Vol. 21, No. 1, March 2000,  Vol. 21, No. 1, pp. 1-63

Chapter 1 of: Bateman, Hazel, Geoffrey Kingston and John Piggott (2001), Forced Saving: Mandating Private Retirement Incomes, Cambridge University Press

Banks, James, Richard Blundell, Richard Disney and Carl Emmerson, “Retirement, pensions and the adequacy of saving: a guide to the debate”, IFS Briefing Note No 29., 2002. http://www.ifs.org.uk/bns/bn29.pdf

Teaching methods

Classes and discussion. Students will be asked to read recent articles from the academic literature.

Assessment methods

Students will be assessed based on a classroom presentation, and a written exam. The focus will be on critical evaluation of the issues and the literature addressed during the course.
The written exam will include a section with mathematical/computational question(s), and a section with a choice of open answer "essay" type questions.
Students will be required to register for the exam through the University's electronic system.
After the exam students will be entitled to see their script by attending the lecturer's office hour. Any marks in excess of the minimum pass grade (18 out of 30) will be automatically registered ("verbalizzato") by the course lecturer after a specified amount of time (which will be communicated to those who attend the exam) has elapsed.

Teaching tools

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Office hours

See the website of Matthew John Wakefield