PUBLIC ECONOMICS - 2

The course is part of the core curriculum of the Master’s Degree in Economics and Governance of Public Organisations and aims to deepen students’ understanding of the economic theory of public intervention and public finance.
In the first module (Public Economics - 1), the course examines how government intervention can interact with the market to achieve objectives of social efficiency and equity. In particular, it analyses the reasons for public intervention and the policy tools used to address externalities, issues related to the provision of public goods, information asymmetries, and uncertainty about future income levels, drawing on examples from environmental regulation, health policy, and social security. The course then focuses on the theory of taxation and the design of tax systems, particularly the Italian system, to explore methods of financing public sector activities and the main sources of government revenue.
In the second module (Public Economics - 2), the course focuses on public expenditure and the welfare system. In particular, after introducing measures of poverty and inequality, it analyses the redistributive effects of government intervention and explores the main areas of welfare policy, including pensions, healthcare, social assistance, and education.

1. Knowledge and understanding:
1.1. understand the motivations for public intervention in the economy and how society can take into account objectives of equity and efficiency in public choices and in the provision of goods and services;
1.2. understand how the presence of public goods and externalities influences the choices of economic agents and which instruments the government can use to restore efficiency in the economy;
1.3. know the principles guiding the design of a tax system and the taxes that characterise it;
1.4. understand the economic effects of taxation;
1.5. recognise the characteristics and understand the functioning of the main taxes in the Italian tax system;
1.6. know the fundamental aspects of welfare programs (in the areas of pensions, healthcare, and social assistance), their organisation, and their financing;
1.7. understand the reasons for public intervention in the provision of welfare services.

2. Ability to apply knowledge and understanding:
2.1 use social choice models to determine the efficiency and equity of public intervention tools;
2.2 be able to identify the degree of progressivity and redistribution associated with different tax structures;
2.3 be able to apply and critically evaluate the functioning of income and consumption taxes;
2.4 use statistical indicators at the national and international level to assess the characteristics of tax and welfare systems;
2.5 understand the system of incentives created by tax and welfare systems and make predictions about individual and collective behaviour;
2.6 determine the benefits for individuals of participating in specific welfare programs and insurance schemes.

3. Judgment skills:
3.1. critically interpret the motivations for public intervention and the choices made by the legislator;
3.2. understand the impact of taxes and welfare programs on the economic decisions of agents;
3.3. reflect on issues related to public expenditure and the financing of welfare systems using an analytical approach;
3.4. evaluate social welfare policies and instruments, as well as public spending decisions.

The course requires basic knowledge of microeconomics and macroeconomics.

First module: PUBLIC ECONOMICS – 1

1) Introduction to the course. Public finance. The objectives of public intervention: equity and efficiency.
2) Welfare economics and social choice: the first and second theorems; contract curve, utility possibilities frontier, social welfare functions.
3) Market failures and government intervention: public goods, externalities, information asymmetries.
4) Tax theory: the main components of taxes, criteria for tax burden distribution, and progressivity.
5) The design of taxes and tax systems and their economic effects: taxes on income, consumption, and firms.

Second module: PUBLIC ECONOMICS – 2
6) Public expenditure and the welfare state
7) Inequality and poverty: equivalent income, equivalence scales, measures of inequality and poverty.
8) Redistributive effects of the public budget: concentration indices of taxes and transfers, measures of progressivity of public intervention, Reynolds-Smolensky and Kakwani indices.
9) Population ageing and the sustainability of the pension system: pension systems, intergenerational contracts, and demographic dynamics.
10) Healthcare: organisation and financing of healthcare systems.
11) Social assistance. Education.

Main reference texts:
Bosi P. (a cura di), Corso di scienza delle finanze, il Mulino, Bologna, nona edizione, 2023.
Baldini M., Toso S., Disuguaglianza, povertà e politiche pubbliche, il Mulino, Bologna, 2009.

Additional references:
Bosi P., Guerra, M.C., I tributi nell'economia italiana, il Mulino, Bologna, ultima edizione
Santoro A., L'economia delle tasse, il Mulino, Bologna, 2025.
Artoni R., Elementi di scienza delle finanze, il Mulino, Bologna, 2015.

The exam consists of a written test that assesses understanding of concepts and the ability to apply them to real-world cases. There is no oral exam.

Duration of the written exam: 1–1.5 hours
Each answer is assigned a variable number of points depending on the complexity of the question
The final grade is determined by the sum of the points obtained in the answers
The exam is passed if the total is at least 18
If the total exceeds 30, honours (cum laude) will be awarded

The questions may include:

theoretical questions
analytical exercises
numerical exercises
sets of TRUE/FALSE statements or multiple-choice questions
graphs, tables, and fiscal indicators to be commented on

On the course MOODLE page, exercises to be completed and sample exam questions with their solutions will be provided.

written

The lecturer has a duty to ensure that the rules regarding the authenticity and originality of exam tests and papers are respected. Therefore, if there is suspicion of irregular conduct, an additional assessment may be conducted, which could differ from the original exam description.

Evaluation Grid:
28-30L: Excellent command of the topics covered in class and in the reference texts; very good analytical skills and ability to apply formulas and quantitative tools; appropriate use of technical terminology.
26-27: Good knowledge of the topics covered in class and in the reference texts; good analytical skills and ability to apply formulas and quantitative tools; fair use of technical terminology.
24-25: Knowledge of the topics covered in class and in the reference texts is not always in-depth; decent analytical skills and application of formulas, but with occasional incorrect use of technical terminology.
22-23: Often superficial knowledge of the topics covered in class and in the reference texts; unclear exposition with deficiencies in technical terminology.
18-21: Occasionally incomplete knowledge of the topics covered in class and in the reference texts; barely sufficient analytical skills and application of formulas and quantitative tools; limited use of technical terminology.

The course will be delivered in a blended format: some lectures will be held in person, while others will be conducted online, both synchronously and asynchronously.

The course is therefore structured as follows:
a) in-person lectures,
b) synchronous online lectures,
c) asynchronous online lectures with guided exercise sessions led by the instructor on course topics,
d) individual study,
e) completion of exercises (Active Learning Labs) independently by students.

Students are encouraged to attend classes actively and to complete, on an ongoing basis, the exercises related to each topic covered (available on the Moodle platform).

All materials useful for attending and actively participating in the course will be promptly made available on the Moodle platform.

This subject deals with topics related to the macro-area "Poverty and inequalities" and contributes to the achievement of one or more goals of U. N. Agenda for Sustainable Development