Abstract
Public economics studies the problems of government expenditures and revenues. Almost all major graduate textbooks on this issue focus on an exclusively microeconomic presentation. Modern problems in public economics, however, are inherently macroeconomic in nature. Just consider what are arguably the most important problems facing modern industrialized countries: demographics, debt, and pensions. As a consequence, many textbooks on public economics are awfully shy about these pressing issues that were aggravated by the recent financial crisis.
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Notes
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In addition, the retirement age can be raised or the social security system can be subsidized by the government with the help of tax revenues.
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In heterogeneous-agent extensions of the Ramsey model, in which households face credit market restrictions such as in Aiyagari (1994), Ricardian equivalence fails.
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- 4.
Of course, there are also disadvantages of discrete-time models. Often, one has to make artificial assumptions about the timing of events, e.g., whether consumption takes place at the beginning or the end of the period, or if many events occur at the same point in time, in what order they take place, e.g., whether a shock is observed prior to or after the labor supply decision. In many cases, the results will be sensitive to the specification of the timing, and we will highlight this at the relevant points.
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Most of the studies which were not based on a general-equilibrium model were empirical ones.
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Fehr and Kindermann (2018) provide an introduction to computational economics using Fortran with an extensive treatment of OLG models and public policy.
References
Aiyagari, R. S. (1994). Uninsured idiosyncratic risk and aggregate saving. Quarterly Journal of Economics, 109, 659–684.
Blanchard, O. J., & Fischer, S. (1989). Lectures on macroeconomics. Cambridge: MIT Press.
de la Croix, D., & Michel, P. (2002). A theory of economic growth: Dynamics and policy in overlapping generations. Cambridge: Cambridge University Press.
Fehr, H., & Kindermann, F. (2018). Introduction to computational economics using Fortran. Oxford: Oxford University Press.
Heer, B., & Maußner, A. (2009). Dynamic general equilibrium modeling: Computational methods and applications (2nd ed.). Heidelberg; Springer.
Ljungqvist, L., & Sargent, T. J. (2012). Recursive macroeconomic theory. Cambridge: MIT Press.
Miranda, M. J., & Fackler, P. L. (2002). Applied computational economics and finance. Cambridge: MIT Press.
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Heer, B. (2019). Introduction. In: Public Economics. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-00989-2_1
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DOI: https://doi.org/10.1007/978-3-030-00989-2_1
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