APPLIED ECONOMICS 352
PUBLIC FINANCE
Fall 2006
Course Description: Principles of financing government, sources of public revenue, objects of public expenditures, problems of fiscal administration, and the application of fiscal policies in stabilizing the national economy. Prerequisite: Junior Standing.
| Main Instructor: Dr. David W. Hughes | Instructor: Dr. R. David Lamie |
| Office: 240 Barre Hall | Office: 240 Barre Hall |
| Columbia phone: 803-788-5700 x 29 | Columbia phone: 803-788-5700 x 36 |
| Clemson phone: 864-656-5766 | Clemson phone: 864-656-5766 |
| Email: dhughe3@clemson.edu | Email: dlamie@clemson.edu |
Course Objectives
1. Increased students understanding and awareness of public finance for states, counties, and cities in the United States and in South Carolina.
2. Further develop student understanding of the basic concepts of economic theory.
3. Introduce student to major concepts in. provision of publicly provided goods and services.
4. Introduce student to major concepts in analysis local and state taxation policy.
5. Introduce student to problems of and prospects for rural communities in the provision of public services.
6. Develop the ability of students to critically evaluate public policy issues concerning rural communities, agribusiness, and natural resource use. And with an emphasis on the role of government
7. Develop student familiarity with computer based analytical techniques and software.
8. Enhance student presentation skills.
The textbook “ State & Local Public Finance ” 3rd ed. by Fisher, and a collection of readings and handouts will form the reading material for the class
Course Outline
I. Introduction
A. Organization of the course
1. Explanation of Student Project (Rural County Report)
2. Explanation of Class Discussion Sessions
3. Topics to be Covered and other Items
4. Assignment of Rural County
II. Why Study State and Local Government Finance? ( Fisher Chapter (CH.) 1 )
A. Revenues and expenditures across U.S., why have local and state governments grown? ( Handout (HO) #1 )
B. Revenues and expenditures in S.C. ( HO #2)
C A brief overview of S.C. issues ( HO #2 )
Version 1: County Report
III. Problems in publicly provided goods and services in rural areas
A. What is rural? ( HO #3 )
B. What problems do rural areas face in delivering publicly provided goods and services (including possible solutions)? ( HO #3 )
C. Land Use Planning and the Von Thunen Model ( HO #4 )
Homework 1: The Von Thunen Model
Class Discussion (CD): Do farmers have a right to farm? S.C. right to farm legislation (readings to be provided)
IV. Public Goods, why we have government
A. Public Goods, when markets are not efficient ( Fisher, CH. 2 ) ( HO #5 )
B. Other reasons for public provision of goods and services ( HO #5 )
C. Club Goods ( HO #5 )
Homework 2: Pure Public Goods
D. Public Choice Theory: what motivates the political process? ( HO #6 )
E. Romer: Economic growth and ideas ( HO #7 )
(CD): Can Drug Companies be trusted with drug policy? (readings to be provided)
Test 1 (List of candidate questions to be provided)
V. How to decide what and how much to product (the demand side of publicly provided goods and services)
A. Analysizing the provision problem (Fisher Ch. 3) ( HO #8 )
B Median Voter Model, determining services without moving (Fisher Ch. 3) ( HO #9 )
C. Tiebout Hypothesis, determining services with moving (Fisher Ch. 5) ( HO #10 )
Version 2: County Report
VI. The supply-side of publicly provided services ( HO #11 )
A. Spatial Externalities (Fisher Ch. 6)
B. Economies of Size, administration costs (Fisher Ch. 6)
C. Baumol Hypothesis (Fisher Ch. 7)
D. Technology, Contracting, and Privatization(Fisher Ch. 7)
CD: School Vouchers in S.C.: Good or Bad Idea? (readings to be provided)
Test 2 (List of candidate questions to be provided)
VI. Tax Analysis ( HO #12 )
A. Principals of Tax Analysis (Fisher Ch. 12)
B. Property Tax (Fisher Ch. 13-14)
Homework #3 Tax Incidence Analysis and Property Tax Assessment
CD: New S.C. Property Tax Legislation: Good or Bad Idea? (readings to be provided)
C. Excise Tax (Fisher Ch.15)
CD: Should S.C. increase the state cigarette tax: or, can cigarette tax increases make smokers happy?
(Nils and Hughes; other reading to be provided)
VII Impacts of Growth and Development on Local Economies and Publicly Provided Goods and Services
A. Costs of Growth ( HO #13 )
Schaffer Ch. 10, p. 171-182.
Sumners,” Small Towns Beware: Industry Can Be Costly .” Planning.
Leistritz and Sell. “Socioeconomic Impacts of Agriculture Processing Plants”
Rural America, Vol. 16, Issue 1 http://www.ers.usda.gov/publications/ruralamerica/ra161/ra161e.pdf
B. Growth Impact Modeling ( HO #14 )
1. Economic multipliers
2. Integrated local economy and public service models
Homework #4 Integrated local economy, public service model
VIII Government as a tool for economic development ( HO #15 )
A. Medicare, Medicaid, and Social Security
B. Defense spending as economic development policy
C. Examples of state and local government development policies
Test #3 (List of candidate questions to be provided)
CD: Should state and local government have an economic development policy and if so, what should that policy be? (readings to be provided)
Final Version, County Report (end of semester)
Grading:
50 % exams (final will be cumulative)
Test 1, Test 2, and Test 3 each 14%
Final Exam: 8%
25 % County Economic Structure Report
10 % class attendance and discussion
15 % Homework
Grading Scale
A 100-90
B 80-89
C 70-79
D 60-69
F Below 60
Discussion Grade : The discussion grade will be divided between the number of discussion sessions that are actually held and an overall class discussion grade. Each student will be allowed one drop for their discussion grade. Part of the overall class discussion grade will be a general class grade.
Homework : Due by 5:00 P.M. on the due date. Grade will drop by 5% for every day late (weekends count as a single day) to a minimum of 70%. Assignments will be accepted till the Friday (at 5:00 P.M.) of closed week (i.e., the last day of class). Students with on time assignments only, who received a grade of less than 70%, have the option of reworking their assignment once to raise their grade on the assignment up to 70%. The policy also applies to the various versions of the rural County report .
Tests : Makeup tests will not be given except under extraordinary conditions (documented illness, religious holidays etc.). Except in extraordinary circumstances, students must notify me before the test if they are unable to take the exam.
County Economic Structure Report : This class will be divided into teams of 3-4 students primarily based on county of interest. Students will take the primary and secondary responsibility for certain parts of the report. A part of your grade will be based on grading submitted by your teammates.
The grading policy (i.e., the percentages) only apply to teams that “hit their mark” in terms of the various versions of the Report. Teams that are dysfunctional (i.e., don't hit the marks) will have a part of their county report percentage moved to the final exam. They will then be required to take a written cumulative final exam (test questions will not be provided). This final will cover all class notes and all assigned reading materials.
Data Gather: Data gathering required in version #1 of the paper must be included in version #2. That is, except for minor changes, data required in the first cut report can not be added to the final report h .
Class Attendance, Behavior and Treatment : Class attendance along with proper classroom behavior is expected. I reserve the right to hold pop quizzes (written or oral) as warranted with appropriate adjustments in grading policy. I also reserve the right to reorder grading percentages and not provide candidate test questions based on classroom attendance and behavior. Cheating will be prosecuted to the fullest extent of the law. All students will be treated as fairly as is possible.
Appointments: By Schedule . Tuesday, Thursday 12:30-2, or by appointment.
2006 by David W. Hughes, Department of Applied Economics and Statistics, Clemson University.