EASTERN MEDITERRANEAN UNIVERSITY

COURSE OUTLINE
03 October, 2007
COURSE CODE Econ 635 COURSE LEVEL Elective / Graduate
COURSE TITLE Public Economics
COURSE TYPE Area Core
LECTURER(S) Prof. Dr. Glenn P. Jenkins
CREDIT VALUE 3 Credit Hrs. ECTS VALUE 6
PREREQUISITES None
COREQUISITES None
DURATION OF COURSE One semester
WEB LINK http://www.emu.edu.tr/~gjenkins/
OFFICE HOURS By Appointment
ASSISTANT

CATALOGUE DESCRIPTION
This course examines the role of the public sector in open economies, with emphasis on the design and
implementation of taxation and fiscal policies. The course focuses on the development of the principles and
applied techniques for identifying and evaluating the impacts of alternative tax policies on the economy’s
resource allocation, income distribution, capital formation, budgetary requirements and inflation. This course
covers the alternative systems for direct and indirect taxes, including taxes on international trade.

AIMS & OBJECTIVES

The objective of this course is for students to obtain the necessary theoretical and empirical tools so that they are
able to have professional careers in the field of applied public finance.

GENERAL LEARNING OUTCOMES (COMPETENCES)

On successful completion of this course, all students will have developed knowledge and understanding of
applied public finance particularly in economics of tax policies with respect direct taxes, indirect taxes and the
taxation of international trade.

On successful completion of this course, all students will have developed their skills in applied micro economic
analysis, and in particular applied welfare economics focused on the analysis of a diverse set of public finance
and taxation issues. Emphasis will be placed on policy design in countries that are open to international trade.
Students will develop their skills in both the theoretical and quantitative analysis of public finance issues.

On successful completion of this course, all students will have developed their appreciation of and respect for
values and attitudes regarding the issues of tax and policy formation. They will also appreciate the importance
of using a general equilibrium approach to the analysis of public policies.

RELATIONSHIP WITH OTHER COURSES

Students should have completed Econ 501 before taking this course, or should have obtained a very high grade
in Econ 201. This course is complementary to Econ 622, which is focused on expenditure analysis. This course is
mainly focused on the analysis of tax and revenue policy design issues.
LEARNING / TEACHING METHOD
Course lectures, classroom examples, assigned exercises, mid-term and final examinations.

METHOD OF ASSESSMENT
Quizzes/Assignments : 25%
Mid Term Exam : 35%
Final Exam : 40%

ATTENDANCE
Attendance is required by school regulation. Students are strongly advised not to miss lecture hours since
success has been observed to be closely related with attendance.

TEXTBOOK/S
1. Stephen Lewis, Jr., Taxation for Development: Principles and Applications, Oxford University Press, 1984.
2. The Tax Policy Handbook, ed. Parthasarathi Shome, Fiscal Affairs Department, International Monetary Fund,
 Washington D.C., USA, 1995.
INDICATIVE BASIC READING LIST
1. Richard A. and Peggy B. Musgrave, Public Finance in Theory and Practice, Fifth Edition, New York: McGraw
Hill, 1989.
2. Jenkins, G., Kuo, G. and Shukla, G.P. Tax " Analyses and Revenue Forecasting, Harvard University, 1999.
3. Tanzi, V., Public Finance in Developing Countries, E. Elgar Published Ltd., 1991.
EXTENDED READING LIST

NONE
SEMESTER OFFERRED
2007-2008 Fall Semester

CONTENT & SCHEDULE

Lectures will be held on Wednesdays (16.30-19.30) BEA 3. The lecture topics within the semester are as in the
following schedule:

WEEK DATE SUBJECT

1 26 Sept Introduction
2 3 Oct Overview and Principles of Tax Reforms
• Arnold C. Harberger, “Monetary and Fiscal Policy for Equitable Economic Growth”, Conference on
Income Distribution and Substainable Growth. International Monetary Fund (June 1995).
• Jenkins and Khadka, Chap. 1: Framework for Tax Reform
• Burgess, Robin and Nicholas Stern, “Taxation and Development,” Journal of Economic Literature, Vol.
XXXI (June, 1993), (pp. 796-818)
3 10 Oct Mobilization of Fiscal Resources for Development, GDP Based Forecasting
• Musgrave, Ch. 34 (pp. 582-601)
• A. Prest, “The Taxable Capacity of a Country,” in J.F. Toye, (ed.), Taxation and Economic
Development, London: Frank Cass, 1979.
• Jenkins, Kuo and Shukla, Chap. 3, 4
Problem Set 1
4 17 Oct Tax Revenue, Excess Burden, Tax Incidence
• Jenkins & Shukla, Chap. 5
• Musgrave, Chap. 15 (pp. 249-276) and Chap. 16 (pp. 277-296).

5 24 Oct Tax Revenue, Excess Burden, Tax Incidence (cont.)

• A. Harberger, “Taxation, Resource Allocation and Welfare” in National Bureau of Economics Research
and The Brookings Institution, The Role of Direct and Indirect Taxes in the Federal Revenue System
(Princeton: Princeton University Press, 1964): 25-75
• Howell H. Zee, “Theory of Optional Commodity Taxation” in Shome, The Tax Policy Handbook, 1995,
(pp. 71-74).

6 31 Oct Externalities and Public Goods

• Nicholson, Chap. 24
• Musgrave, Chs. 4 (pp. 41-58), 5 (pp. 59-72).
Problem Set 2
7 7 Nov Indirect Taxes
• Lewis, Chaps. 12, 13
• Howell H. Zee, “Tax Cascading: Concept and Management in Shome, The Tax Policy Handbook, 1995,
(pp. 75-85).

8 14 Nov Value Added Tax

• Jenkins and Khadka, Chapter 2: Indirect Taxes
• Howell H. Zee, “Value Added Tax” in Shome, The Tax Policy Handbook, 1995, (pp. 86-99)
• A. Tait, Value Added Tax : International Practice and Problems, (IMF, Washington D.C., 1988), Chs.
1, 2, 3.
• A. Tait, VAT Policy Issues, Paper prepared for IMF/UNDP Seminar on V-A Tax in Asia, Mar., 1990.
• C. Shoup, “Criteria for Choice Among Types of Value-Added Tax,” Discussion Paper, World Bank,
Washington, DC, 1986.
Problem Set 3
 WEEK DATE SUBJECT
9 21 Nov Mid-Term Examinations
10 28 Nov Taxes on International Trade: Import Tariffs and Export Duties
• Lewis, Chap. 9, 10, 11, 16
• Julio Escolano, “International Trade Taxes” in Shome, The Tax Policy Handbook, 1995, (pp. 199-217).
• B. Balassa, “Concepts and Measurements of Protection,” in B. Balassa and Associates, The Structure of
Protection in Developing Countries, (Baltimore: Johns Hopkins Press, 1971), Ch. 1 (3-12; 21-25).
• M. Gillis and C. McLure, “Coordination of Tariffs and Internal Indirect Taxes,” in Readings on
Taxation in Developing Countries, Bird and Oldman, eds.(Baltimore: Johns Hopkins University Press,
1975) Ch. 25.

11 5 Dec Taxation of Income: Personal Income

• Jenkins and Khadka, Chapter 3: Income Tax
• Lewis, Chap. 4
• John Norregaard, “The Progessivity of Personal Income Tax System” in Shome, The Tax Policy
Handbook, 1995, (pp. 129-133)
12 12 Dec Taxation of Income: Corporate Income and Tax Integration
• Lewis Chap. 5
• John R. King, “The Concept of Business Income and Taxable Income” in Shome, The Tax Policy
Handbook, 1995, (pp. 134-136).
• Dale Chua, “Depreciation Schedule” in Shome, The Tax Policy Handbook, 1995, (pp. 136-139).
• Dale Chua, “Inventory Valuation” in Shome, The Tax Policy Handbook, 1995, (pp. 139-141).
• Dale Chua, “Loss Carryforward and Loss Carryback” in Shome, The Tax Policy Handbook, 1995, (pp.
141-142).
• John R. King, “Integration of Personal and Corporate Income Taxes: Advantages and Disadvantages” in
Shome, The Tax Policy Handbook, 1995, (pp. 149 - 151).
• Dale Chua and John R. King, “The Mechanics of Integration” in Shome, The Tax Policy Handbook,
1995, (pp. 151 - 155).
• John R. King, “Taxation of Capital Gains” in Shome, The Tax Policy Handbook, 1995, (pp. 155 - 158).
• R. Conrad, “Dividend Relief and Inflation Adjustments,” Symposium held at the International
Tax Program, Harvard University, November 1, 1991.

Problem Set 4
13 19 Dec Incidence of the Corporation Income Tax, Inflation and Taxation
• Harberger, “The ABCs of Corporation Tax Incidence: Insights Into the Open-Economy Case,” in
American Council for Capital Formation, Tax Policy and Economic Growth, Washington: ACFF,
1995: pp. 47-76.
• V. Tanzi, Public Finance in Developing Countries, (Edward Elgar Publishing Ltd., 1991), Ch. 7:
“Inflation, lags in collection and the real value of tax revenue”.
• G. Jenkins, “The Impact of Inflation on Corporate Taxes and the Cash Flow of Business,” Canadian
Tax Journal, Vol. XXXIII, No. 4, July-August, 1985.
14 26 Dec Tax Incentives
• Dale Chua, “Tax Incentives” in Shome, The Tax Policy Handbook, 1995, (pp. 165-168).
• A. Harberger, “Tax Neutrality in Investment Incentives,” in Aaron, H., and Boskin, M., eds., The
Economics of Taxation, The Brookings Institution, Studies of Government Finance, 1980.
• A. Harberger, “Handout for Session on ‘Tax Incentives in a Capital Theory Context,’” Latin American
Meetings of the Econometrics Society, Costa Rica, August, 1988.
• G. Jenkins, “Tax Shelter Finance: How Efficient Is It?” Canadian Tax Journal, Vol. 38, No. 2, (pp. 270-
285).
15 5 Jan 08 Final Examination

ASSIGNMENTS
Assignments are designed to develop practical knowledge in applying the concepts in real life situations with
quantitative applications.
.

GUIDELINES FOR ASSIGNMENTS:

Homework should be clearly written with a pencil or pen (red reserved for correction) on an A-4 paper. Students
are allowed to discuss the assignments amongst themselves, but they must write up and submit their own
solutions to the assignments

Late assignments, within acceptable dates, will be graded with a 20% discount. No homework can be accepted
after the return of corrected homework.

TUTORIAL WORK AND ASSIGNMENT SCHEDULES

WEEK Issue Date Due Dates ASSIGNMENT

2 Oct 10,2007 Due Oct 31, 2007 Assignment 1
6 Oct 31, 2007 Due Nov 14, 2007 Assignment 2
8 Nov 14, 2007 Due Nov 31, 2007 Assignment 3
9 Nov 31, 2007 Mid term exam
12 Dec 12, 2007 Due January 5, 2007 Assignment 4
15 Jan 5, 2007 Final examination

PLAGIARISM
Individual work must reflect an individual’s own effort. Do not copy from others. Academic dishonesty carries a
penalty that may range from recieving a grade of zero to expulsion from the University. Plagiarism is an offence
and will be dealt with according to University regulations.

MAKE-UP EXAMS
Students who have valid excuses, will be allowed to take make-up examinations for mid-term and final exams.
No make-up exams for quiz.