This course is an introduction to the economic analysis of incentives generated by tax systems and income transfer programs. The emphasis is on understanding how, and the extent to which, individuals and firms react to those policies – the central question addressed in the growing field of empirical public finance. The discussion on key design elements of those policies are expected to foster students’ understanding of important trade-offs involved in implementing government policies. The course will cover the following topics: tax incidence, efficiency and optimal taxation, income taxation and labour supply, taxes on consumption, taxes on savings, taxes on investment and corporate taxation. Examples will be drawn from taxes and income transfer programs implemented in Australia and internationally. Particular attention will be paid to the application of quasi-experimental methods to public finance. By reading articles that apply quasi-experiments for each topic, students are expected to develop a practical understanding of issues involved in taking econometric models to the real world. Students will be exposed to varieties of estimation techniques.
Upon successful completion, students will have the knowledge and skills to:
On successful completion of this course, students should:
(a) Understand key features of major fiscal institutions and their behavioural implications
(b) Be able to analyse incentives generated by government policies
(c) Formulate quasi-experimental analysis
(d) Be able to critically evaluate quasi-experimental studies
(e) Be able to understand and assess estimation results reported in journal articles
Exams (Midterm, 30%; Final, 70%)
In response to COVID-19: Please note that Semester 2 Class Summary information (available under the classes tab) is as up to date as possible. Changes to Class Summaries not captured by this publication will be available to enrolled students via Wattle.
The ANU uses Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. While the use of Turnitin is not mandatory, the ANU highly recommends Turnitin is used by both teaching staff and students. For additional information regarding Turnitin please visit the ANU Online website.
3 hours lecture per week, 6 hours reading and problem solving
A textbook is not required but two textbooks are recommended for the course:
Gruber, J. (2013): Public Finance and Public Policy, Worth Publishers, 4th Edition.
Wooldridge, J. M. (2012): Introductory Econometrics – A Modern Approach, 5th Edition.
Week 1: Introduction to empirical tools of public finance
Wooldridge, J. M. (2012): Introductory Econometrics – A Modern Approach, 5th Edition, Chapters 1-7+15.
Weeks 2+3: Tax incidence
Gruber, J. (2013): Public Finance and Public Policy, Worth Publishers, 4th Edition, Chapter 19.
Chetty, R., Looney, A., Kroft, K. (2009): Salience and Taxation: Theory and Evidence, American Economic Review 99(4), 1145-1177.
Meyer, B. D. (1995): Natural and Quasi-Experiments in Economics, Journal of Business and Economics Statistics 13(2), 151-161.
Weeks 4+5: Efficiency and optimal taxation
Gruber, J. (2013): Public Finance and Public Policy, Worth Publishers, 4th Edition, Chapter 20.
Gorodnichenko, Y., Martinez-Vazquez, J., Peter. K. S. (2009): Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia, Journal of Political Economy 117(3), 504-554.
Weeks 6-7: Income Taxation and Labour Supply
Gruber, J. (2013): Public Finance and Public Policy, Worth Publishers, 4th Edition, Chapter 21.
Gruber and Saez (2002): The Elasticity of Taxable Income: Evidence and Implications, Journal of Public Economics 84, 1-32.
Week 8: Taxes on Consumption
Gentry, W. M., Hubbard, R. G. (1996): Distributional Implications of Introducing a Broad-Based Consumption Tax, in: James M. Poterba (ed.), Tax Policy and the Economy, Volume 11, MIT.
Li, S., Linn, J., Muehlegger, E. (2014): Gasoline Taxes and Consumer Behavior, American Economic Journal: Economic Policy 6(4), 302-342.
Week 9: Taxes on Savings
Gruber, J. (2013): Public Finance and Public Policy, Worth Publishers, 4th Edition, Chapter 23.
Engelhardt, G. V. (1996): Tax Subsidies and Household Saving: Evidence from Canada, Quarterly Journal of Economics 111(4), 1237-1268.
Week 10: Taxes on Investment
Gruber, J. (2013): Public Finance and Public Policy, Worth Publishers, 4th Edition, Chapter 24.
Chetty, R. and Saez, E. (2005): Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut, Quarterly Journal of Economics 120(3), 791-833.
Week 11: Corporate Taxation
Gruber, J. (2013): Public Finance and Public Policy, Worth Publishers, 4th Edition, Chapter 25.
Saez, E., Matsaganis, M., Tsakloglou, P. (2012): Earnings Determination and Taxes: Evidence from a Cohort-Based Payroll Tax Reform in Greece, Quarterly Journal of Economics 127, 493-533.
Week 12: Special Topics
Tuition fees are for the academic year indicated at the top of the page.
If you are a domestic graduate coursework or international student you will be required to pay tuition fees. Tuition fees are indexed annually. Further information for domestic and international students about tuition and other fees can be found at Fees.
- Student Contribution Band:
- Unit value:
- 6 units
If you are an undergraduate student and have been offered a Commonwealth supported place, your fees are set by the Australian Government for each course. At ANU 1 EFTSL is 48 units (normally 8 x 6-unit courses). You can find your student contribution amount for each course at Fees. Where there is a unit range displayed for this course, not all unit options below may be available.
Offerings, Dates and Class Summary Links
ANU utilises MyTimetable to enable students to view the timetable for their enrolled courses, browse, then self-allocate to small teaching activities / tutorials so they can better plan their time. Find out more on the Timetable webpage.
Class summaries, if available, can be accessed by clicking on the View link for the relevant class number.