ECON 389
Tax Policy in Global Perspective Spring 2024
Division II Quantitative/Formal Reasoning
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Class Details

Government policy is important for economic development. To finance their policies, governments must build the fiscal capacity to implement a tax system. In turn, fiscal capacity–the ability for the government to raise revenue–depends on economic development. This endogeneity between fiscal capacity and economic development creates challenges for tax policy in developing countries. Given these challenges, what types of taxes should countries use to raise revenues? How can governments build the fiscal capacity to generate revenue to finance critical services? This class explores tax policy from a global and comparative perspective. Because most students will be CDE fellows, we will emphasize tax policy issues, examples, and evidence that are pertinent to developing countries. However, many tax policy lessons are universal so we will also learn about tax policies in developed countries, especially issues relevant for transnational transactions. Topics addressed include: how economic principles can be applied to the efficiency and equity consequences of tax policies; how personal income taxes, corporate income taxes, and value-added taxes are designed and administered and how they influence the economy; ideas for fundamental tax reforms; the debate over progressive taxes versus “flat” taxes; how taxes affect incentives to save and invest; how market failures and administrative problems may influence the optimality of tax policy; the implications of global capital flows and corporate tax avoidance for tax policy; tax holidays and other special tax incentives for investment; empirical evidence on the influence of taxes on foreign direct investment, labor supply, and tax evasion; tax policy towards natural resources such as minerals and oil; case studies of efforts to reform tax administration and reduce tax evasion and corruption; taxes on land and property; taxes on imports and exports; presumptive taxation; and the informal economy and its implications for tax policy.
The Class: Format: seminar
Limit: 19
Expected: 15-19
Class#: 3824
Grading: yes pass/fail option, yes fifth course option
Requirements/Evaluation: midterm exam, several problem sets, two 10-page essays
Prerequisites: one public economics course or microeconomics course (ECON 504 or ECON 110), and one empirical methods course (POEC 253 or ECON 255, 502, or 503); students who have previously taken ECON 351 will not be enrolled
Enrollment Preferences: CDE students, but undergraduates with the prerequisites are welcome
Distributions: Division II Quantitative/Formal Reasoning
Notes: This course is cross-listed and the prefixes carry the following divisional credit:
ECON 514 Division II ECON 389 Division II
QFR Notes: The course builds on other QFR Reasoning econ classes.
Attributes: POEC Depth
POEC Skills

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