This course is an introduction to economic analyses of incentives generated by institutions. The emphasis is on understanding the extent to which government-designed institutions, such as tax policies and income transfer programs, affect the behaviour of individuals and firms. Such understanding is important in assessing government policies: we would like to know both whether a policy achieves its stated goal and whether any unintended consequences are generated in process. We start with a general discussion on empirical tools for analysing behavioural responses, and cover topics such as the effects of taxes on labour supply, saving, investment, corporate finance, and multinational corporations. Also covered are the response of workers to unemployment insurance, disability insurance, and workers' compensation. In each topic, we will discuss the institutional setting, consider possible changes in behaviour induced by government policies, and closely read a recent empirical study. 

By the end of this course, you will

- be familiar with some of the important fiscal institutions

- have developed an ability to pinpoint incentives generated by those institutions

- be exposed to some of the recent empirical studies and results

- have an ability to critically assess the difference between causality and correlation.

Jonathan Gruber, 2009, Public Finance and Public Policy, Third Edition, New York: Worth Publishers.