: Name of The Course Explaining Economic Policy 2015-2016 Academic Year Master of Research in Economics, Finance and Management 1. Description of the subject Topics in Applied Economics II Code: 32087 Total credits: 3 ECTS Workload: 75 hours Term: 2nd Type of subject: Elective Department of Economics and Business Teaching team: Giacomo Ponzetto
2. Teaching guide Introduction In the last decades, a thriving research program in political economics has shown that the positive understanding of economic policy, and of economic phenomena more broadly, requires the careful consideration of the political process through which policies are determined and of the political institution under which markets operate. Contents The objective of this course is to introduce the students to the tools and models that underpin active research in political economy. While the methodological focus of the class is theoretical, our analysis is motivated by empirical evidence and we will cover empirical as well as theoretical papers. Furthermore, the modeling tools presented in this course are an essential prerequisite to understand recent empirical research in the area. Teaching methodology The lectures are based on the following textbook, which is required reading: Persson, Torsten, and Guido Tabellini. 2000. Political Economics: Explaining Economic Policy. Cambridge, MA: MIT Press. Other recommended reference books are the following: Besley, Timothy. 2006. Principled Agents? The Political Economy of Good Government. Oxford: Oxford University Press. Grossman, Gene M., and Elhanan Helpman. 2001. Special Interest Politics. Cambridge, MA: MIT Press. In addition to the textbook, we will cover recently published articles. A detailed list of the readings for each topic will be given in class. A preliminary list is provided in section 3. Lecture notes will be made available. The seminal papers that underlie the textbook analysis are not explicitly included in the reading list, but you are naturally encouraged to refer to the primary sources for an in-depth analysis of any topic Assessment and Grading System The assignments for the course are intended to foster engagement with the current research frontier and to stimulate creative thinking about the students own research projects. There will be no problem sets nor a final exam. Instead, there are two requirements: 1) At the beginning of each week, each student must send the instructor an e-mail with personal thoughts, criticisms, and ways forward on the topics to be covered in the following week. The email should be at least one page but no more than two. Advance reading the materials will help frame your questions and organize ideas. However, you should never summarize the readings, but rather propose new directions for future research. 2) One week after the last class, each student must submit a final project. The project should be around 6 and no more than 10 pages long and can be any of the following: a. The proposal for an original paper. 2
b. A sufficiently challenging extension of an existing model or replication of an existing empirical analysis, which might become the basis of a paper. c. A critical survey of the literature on a specific topic that was not extensively covered in class. d. Referee reports on two important articles published in the last few years. The weekly assignments (1) and active participation to classroom discussion will count for 30% of the final grade, and the final project (2) will count for the remaining 70%. Grading will take into account that projects belonging to types (a) and (b) are more challenging than those of types (c) and (d). 3
3. Programme of activities Description of the subject: Topics in Applied Economics II Total credits: 3 ECTS Total number of hours: 20 Estimated time spent on the subject: 75 - In the classroom: 20 - Outside the classroom: 55 The following outline sketches the topics covered in the course. Required readings are marked by a star. The reading list is subject to marginal changes before and during the class. Majority Rule: The Median Voter * Persson and Tabellini 2.1-2.2, 3.1-3.3, and 6.1. Gerber, Elisabeth R., and Jeffrey B. Lewis. 2004. Beyond the Median: Voter Preferences, District Heterogeneity, and Political Representation, Journal of Political Economy 112(6): 1364-1383. Probabilistic Voting * Persson and Tabellini 2.3, 3.4, 7.1, and 7.4. Strömberg, David. 2008. How the Electoral College Influences Campaigns and Policy: The Probability of Being Florida, American Economic Review 98(3): 769-807. Larcinese, Valentino, James M. Snyder, and Cecilia Testa. 2013. Testing Models of Distributive Politics Using Exit Polls to Measure Voter Preferences and Partisanship, British Journal of Political Science 43(4): 845-875. Voter Rationality and Incentives to Vote * Grossman, Gene M., and Elhanan Helpman. 2001. Special Interest Politics. Cambridge, MA: MIT Press. 3.1. Coate, Stephen, and Michael Conlin. 2004. A Group Rule-Utilitarian Approach to Voter Turnout: Theory and Evidence, American Economic Review 94(5): 1476-1504. Feddersen, Timothy, and Alvaro Sandroni. 2006. A Theory of Participation in Elections, American Economic Review 96(4): 1271-1282. Coate, Stephen, Michael Conlin, and Andrea Moro. 2008. The Performance of Pivotal- Voter Models in Small-Scale Elections: Evidence from Texas Liquor Referenda, Journal of Public Economics 92(3-4): 582-596. Heterogeneous Voter Information * Strömberg, David. 2004. Radio's Impact on Public Spending, Quarterly Journal of Economics 119(1): 189-221. * Glaeser, Edward L., Jesse M. Shapiro, and Giacomo A. M. Ponzetto. 2005. Strategic Extremism: Why Republicans and Democrats Divide on Religious Values, Quarterly Journal of Economics 120(4): 1283-1330. * Ponzetto, Giacomo A. M. 2011. Heteregeneous Information and Trade Policy. CEPR Discussion Paper No. 8726. Lobbying * Persson and Tabellini (2000) 3.5, 7.3 and 7.5.1.
* Grossman, Gene M., and Elhanan Helpman. 2001. Special Interest Politics. Cambridge, MA: MIT Press. Levitt, Steven D. 1994. Using Repeat Challengers to Estimate the Effect of Campaign Spending on Election Outcomes in the U.S. House, Journal of Political Economy 102 (4): 777-798. Ansolabehere, Stephen, John M. de Figueiredo, and James M. Snyder. 2003. Why Is There So Little Money in U.S. Politics? Journal of Economic Perspectives 17 (1): 105-130. Mian, Atif, Amir Sufi, and Francesco Trebbi. 2010. The Political Economy of the US Mortgage Default Crisis, American Economic Review 100(5): 1967-98. Policy-Motivated Politicians: Partisanship and Citizen Candidates * Persson and Tabellini (2000) 5.1-5.3. * Besley, Timothy, and Stephen Coate. 1997. An Economic Model of Representative Democracy, Quarterly Journal of Economics 112 (1): 85-114 Rent-Seeking Politicians: Political Agency * Persson and Tabellini (2000) 4.1-4.5. * Besley, Timothy. 2006. Principled Agents? The Political Economy of Good Government. Oxford: Oxford University Press. * Besley, Timothy, and Robin Burgess. 2002. The Political Economy of Government Responsiveness: Theory and Evidence from India, Quarterly Journal of Economics 117 (4): 1415-1451. * Snyder, James M. and David Strömberg. 2010. Press Coverage and Political Accountability, Journal of Political Economy 118 (2): 355-408. * Eisensee, Thomas, and David Strömberg. 2007. News Droughts, News Floods and U.S. Disaster Relief, Quarterly Journal of Economics 122 (2): 693-728. Voter Information and Political Decentralization * Besley, Timothy, and Anne Case. 1995. Incumbent Behavior: Vote-Seeking, Tax- Setting, and Yardstick Competition. American Economic Review 85(1): 25-45. * Boffa, Federico, Amedeo Piolatto, and Giacomo A. M. Ponzetto. 2015. Political Centralization and Government Accountability. Quarterly Journal of Economics, forthcoming Legislatures and Electoral Rules * Persson and Tabellini (2000) 5.4, 7.2, 7.5.2-7.5.3, Ch. 8 and 10. * Persson, Torsten, and Guido Tabellini. 2004. Constitutions and Economic Policy, Journal of Economic Perspectives 18 (1): 75-98. * Knight, Brian. 2005. Estimating the Value of Proposal Power, American Economic Review 95 (5): 1639-1652. Macroeconomic Dynamics and the Commitment Problem * Persson and Tabellini (2000) Ch. 11-13, 15-16 and 1 7.2. 5