文档介绍：Chapter 2 – Tools of Positive Analysis
Public Economics
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Policy analysis is hard
Why is it so hard to tell what’s going on with government actions?
Consider lowering e tax rates. Will lowering taxes increase work effort and labor supply?
Unlike the physical and natural sciences, difficult to perform carefully controlled experiments on the economy.
Oftentimes, there is no “control group” or “comparison group” for a policy.
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Alternatives to an experiment
Use of statistical tools to study impact of public policies.
Will use the debate over the effect of taxes on labor supply to illustrate how positive analysis is done in public finance.
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Role of economic theory
Consider analyzing Table
As marginal tax rates have increased, average weekly hours have decreased from 1955 to 2001.
Can we conclusively say that taxes have depressed labor supply? No.
Nonlabor e rose (dividends, interest)
Attitudes may have changed
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Table
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Role of economic theory
In reality, an unlimited number of factors change over time, and could affect labor supply.
Economic theory helps isolate a small set of variables that are important influences on behavior.
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Role of economic theory
Theory would suggest that person maximizes utility -- and would include factors like the person’s own wage rate.
Theory is often too simple – may ignore important considerations. But whole point of model building is to reduce a problem to its essentials.
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Role of economic theory
In this labor supply case, the after-tax wage changes with the policy.
Theory predicts that the effect on hours is ambiguous.
The substitution effect predicts that as the wage (price of leisure) falls, consumers substitute toward leisure.
The e effect says that if leisure is a normal good, consumers consume less of it as e falls.
Only empirical work – analysis based on observation as opposed to theory – can answer this question.
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Methods of Empirical Analysis
There are three main methods:
Interviews
Experimen