Public Economics (ECON 320)

2021 Fall
Faculty of Arts and Social Sciences
Hakkı Özdenören,
Click here to view.
Formal lecture
Click here to view.


Fundamental theorems of welfare economics; theories of government; public goods; externalities; public choice; income redistribution; taxation, income distribution and efficiency; public production, incentives and the bureaucracy; privatization.


Introduction to the formal analysis of public sector.


  • The course participants are supposed to achieve ? knowledge of central concepts and basic models of modern public economics based on second best welfare theory ? relevant knowledge of actual policies ? some knowledge of relevant issues currently on the political agenda Skills: The course participants are supposed to acquire abilities to ? explain the economic contents and trade-offs captured by the models, ? discuss the assumptions, relevance, and limitations of the models, ? identify and analyse policy problems in public economics, ? assess arguments appearing in the policy debate.


1. Understand the world, their country, their society, as well as themselves and have awareness of ethical problems, social rights, values and responsibility to the self and to others. 4

2. Understand different disciplines from natural and social sciences to mathematics and art, and develop interdisciplinary approaches in thinking and practice. 3

3. Think critically, follow innovations and developments in science and technology, demonstrate personal and organizational entrepreneurship and engage in life-long learning in various subjects; have the ability to continue to educate him/herself. 4

4. Communicate effectively in Turkish and English by oral, written, graphical and technological means. 3

5. Take individual and team responsibility, function effectively and respectively as an individual and a member or a leader of a team; and have the skills to work effectively in multi-disciplinary teams. 3

1. Possess sufficient knowledge of mathematics, science and program-specific engineering topics; use theoretical and applied knowledge of these areas in complex engineering problems. 1

2. Identify, define, formulate and solve complex engineering problems; choose and apply suitable analysis and modeling methods for this purpose. 1

3. Develop, choose and use modern techniques and tools that are needed for analysis and solution of complex problems faced in engineering applications; possess knowledge of standards used in engineering applications; use information technologies effectively. 1

4. Have the ability to design a complex system, process, instrument or a product under realistic constraints and conditions, with the goal of fulfilling specified needs; apply modern design techniques for this purpose. 2

5. Design and conduct experiments, collect data, analyze and interpret the results to investigate complex engineering problems or program-specific research areas. 1

6. Possess knowledge of business practices such as project management, risk management and change management; awareness on innovation; knowledge of sustainable development. 3

7. Possess knowledge of impact of engineering solutions in a global, economic, environmental, health and societal context; knowledge of contemporary issues; awareness on legal outcomes of engineering solutions; knowledge of behavior according to ethical principles, understanding of professional and ethical responsibility. 1

8. Have the ability to write effective reports and comprehend written reports, prepare design and production reports, make effective presentations, and give and receive clear and intelligible instructions. 3

1. Develop knowledge of theories, concepts, and research methods in humanities and social sciences. 5

2. Assess how global, national and regional developments affect society. 3

3. Know how to access and evaluate data from various sources of information. 3

1. Provide constructive analysis of economic phenomena at the national and international level, and interactions between the two. 2

2. Develop an understanding of organizations and institutions in the society as well as their influence on the economy. 5

3. Recognize how incentives shape the behavior of individuals and organizations. 5

4. Identify "economic" problems and propose alternative models and/or design and conduct research to provide viable solutions using theoretical tools and/or quantitative methods. 4

5. Communicate problems and solutions to managerial and policy decision-making units as well as to lay audiences. 5

1. To analyze national and global events from various social science perspectives. 4

2. To demonstrate theoretical and practical knowledge on political science and international relations and to state views and positions with advanced oral and written skills. 1

3. To compete for increasing career opportunities in national and global institutions. 4

4. To (be able to) understand and follow the changes in political behaviours, opinions and structures. 1

5. To gain the ability to make logical inferences on social and political issues based on comparative and historical knowledge. 3

1. Understand and follow changes in patterns of political behavior, ideas and structures. 1

2. Develop the ability to make logical inferences about social and political issues on the basis of comparative and historical knowledge. 3


  Percentage (%)
Final 40
Midterm 60



1) Lecture on Public Economics; A. Atkinson and J. Stiglitz; McGraw-Hill.
2) Economics of the Public Sector; J. Stiglitz; Norton.

Chapter 1. Foundations of Public Economics: What is Public Economics? Pareto
Efficiency, Competitive Equilibrium, First Welfare Theorem, Second Welfare Theorem.

Chapter 2. Inequality and Redistribution
TUIK Haber Bulteni, "Gelir ve Yasam Kosullari Arastirmasi, 2009"
Income inequality in OECD countries.,3746,en_2649_201185_464627Mankiw, N. Gregory, Matthew Weinzierl, and Danny Yagan, (2009). "Optimal Taxation
in Theory and Practice," Journal of Economic Perspectives 23(4), 147-174.
Mirrlees, James A, "Information and Incentives: The Economics of Carrots and Sticks,"
Nobel Prize Lecture, December 9, 1996.
Mirrlees, James A., (1971). "An Exploration in the Theory of Optimal Income Taxation,"
Review of Economic Studies 38, 175-208.
Midterm 1: Nov. 3rd, Friday
Chapter 3. Social Insurance
Feldstein, Martin (2005). "Rethinking Social Insurance," NBER Working Paper 11250.
3.A- Unemployment Insurance
Hopenhayn, Hugo and Juan Pablo Nicolini, (1997). "Optimal Unemployment Insurance,"
Journal of Political Economy, 105(2), 412-438.
3.B- Social Security System
Krueger, Dirk and Felix Kubler, (2006). "Pareto-Improving Social Security Reform when
Financial Markets Are Incomplete!?" American Economic Review, 96 (3), 737-755.
Feldstein, Martin and Je¤rey Liebman, (2001). "Social Security," NBER Working Paper
Choi, James, David Laibson, Brigitte Madrian, (2011). "$100 Bills on the Sidewalk:
Suboptimal Investment in 401(k) Plans." Review of Economics and Statistics 93(3):748-
Midterm 2: week of Dec. 10-16.
3.C- Health Care Insurance
Akerlof, George A. (1970). "TheMarket for ’Lemons’: Quality Uncertainty and theMarket
Mechanism," The Quarterly Journal of Economics, 84 (3), 488-500.
Chapter 4. Optimal Policies Regarding Children: Inheritance and Education
Lochner, Lance (2007). "Intergenerational Transmission," New Palgrave Dictionary of
Mazumder, Bashkar, (2005). "The Apple Falls Even Closer to the Tree than We Thought:
New and Revised Estimates of the Intergenerational Inheritance and Earnings," Chapter
2 in Unequal Chances, edited by Bowles, Gintis, and Groves.
Stokey, Nancy L., (1996). "Shirtsleeves to Shirtsleeves: The Economics of SocialMobility,"
Nancy L. Schwarz Lecture.
Phelan, Christopher, (2006). "Opportunity and Social Mobility," Review of Economic
Studies, 73 (2), 487-504.
Currie, Janet, (2001). "Early Childhood Education Programs," Journal of Economic
Perpectives, 15 (2), 213-238.
Currie, Janet, (1997). "Choosing Among Alternative Programs for Poor Children," Chil-
dren and Poverty, 7 (2), 113-131.