Public Economics studies the behavioral and distributional effects of government policy and the public sector. It aims at providing a framework for answering questions like
- whether a good or service should better be provided by the state or by the market
- whether emissions of CO2 should better be regulated by taxes or marketable permits
- whether government expenditures should better be financed by taxes imposed on consumption or taxes imposed on income and wealth
- whether recent reforms of the income tax make the tax system more or less progressive.
This framework is based on the economic analysis of (i) market failure and the limits of government intervention as well as (ii) the behavioral and distributional consequences of taxation and government expenditures. Therefore, the subject makes extensive use of microeconomic methods and requires a sound knowledge of institutional and empirical facts of the public sector.
Students specializing in Economics benefit from studying Public economics by deepening their knowledge of institutions and empirics of fiscal policy and the public sector and by improving their skills in applying microeconomic methods to real-world problems.
Students specializing in Business and Management additionally benefit from studying Public Economics because the micro-methods are closely related to those used in Business Science and because standard topics of the field like “taxation”, “environmental regulation”, or “public health care” are highly relevant for private business as well.