Economics C15 ECONOMIC POLICY ANALYSIS 1 unit course Autumn 2003 and Spring 2004

Course Coordinator: Wendy Carlin, Room 216 Drayton House (Economics Dept) Email contact: [email protected]

Course Aims and Objectives

Aim: Objectives: The course aims to provide final At the end of the course, students should: year students with the opportunity • Have an understanding of the application of economic theory to explore the way in which and empirical methods to issues in current economic policy economic theory and evidence can analysis. be used to analyse topical policy • Have had the experience of analysing a complex and unfamiliar issues. The course should be of issue, drawing on their knowledge of economic theory and particular value to students who methods, and on a range of relevant research and policy papers, intend to work as professional without being able to rely on comprehensive textbook economists in government treatments. departments or other agencies, • Be able to write cogent and well-argued analyses of a number of where they will be expected to aspects of the issues they have studied, making appropriate use provide economic analysis and of both theory and empirical evidence. advice on specific issues of policy, • Be able to cooperate with other class members to produce a including new and unfamiliar coherent team-presentation. issues about which textbooks say very little.

Prerequisites C15 is available only to students who have already completed the three second-year core papers: B201 Microeconomics, B202 Macroeconomic Theory and Policy and B203 Quantitative Economics and Econometrics. A thorough understanding of the material taught in the core units will be assumed in the teaching of C15.

Course Content The course aims to allow final year students to share in the policy-oriented research activity of members of the department. Many members of staff are involved in policy research, and in advice to government departments (in the UK and abroad), the European Commission, the Competition Commission, the World Bank, etc. This policy-related research activity is reflected in the sessions offered. Equally, students taking the course are expected to come to terms with concepts, theory and empirical work at the level at which the policy discussion between academic economists and government policy- makers is typically conducted.

1 The seven economic policy issues that the course will address in 2003/2004 are: • Environment: environmental justice; social cost of carbon - David Pearce

• Development: education subsidies to alleviate poverty - Orazio Attanasio

• Education: school inputs and pupil performance - Kjell Salvanes

• Evaluation of labour market policies: welfare to work - Richard Blundell

• Auctions and economic policy - Tilman Börgers

• Minimum wages / Intergenerational mobility - Steve Machin

• Migration - Christian Dustmann, Ian Preston

Course Organization The course consists of weekly two-hour lectures. There are seven topics, each of which is the subject of two lectures (i.e. four hours of lectures in total per topic).

There are in addition accompanying tutorial classes, one for each topic, organized in groups of around 15 students. As shown on the table below, there is an organizational meeting for each class group before the classes begin. In addition in the first week of the second term, there will be a class in which a policy analysis exercise set over the Christmas break will be discussed. An additional session will be timetabled in the spring term by the class teacher to discuss essay-writing and exam preparation technique.

Schedule for classes and lectures 2003 - 2004:

Term 1 Date (week beg.) Week Lectures: Monday 3-5pm Classes 22/9/03 1 Registration week 29/9/03 2 Introductory (Wendy Carlin) 6/10/03 3 Topic 1: David Pearce 13/10/03 4 Organizational meetings (run by TA) 20/10/03 5 Topic 2: Orazio Attanasio 27/10/03 6 Class Topic 1

3/11/03 7 Reading Week 10/11/03 8 Topic 3 Kjell Salvanes 17/11/03 9 Class Topic 2

24/11/03 10 Topic 4 Richard Blundell 1/12/03 11 Class Topic 3

8/12/03 12

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Term 2 Date Week Lecture Class

12/1/04 1 Class policy debate 19/1/04 2 Topic 5 Tilman Börgers 26/1/04 3 Class Topic 4

2/2/04 4 Topic 6 Steve Machin Minimum wages; 9/2/04 5 Intergenerational mobility Class Topic 5

16/2/04 6 Reading Week 23/2/04 7 Topic 7 Christian Dustmann; Ian Preston 1/3/04 8 Class Topic 6

8/3/04 9 15/3/04 10 Class Topic 7

22/3/04 11

Topic lecturers will provide students with the following material: • A list of up to a dozen readings per topic. Many of these will be journal articles or unpublished papers, so that students acquire the experience of reading and attempting to understand economics research in the way it is conventionally published. • A set of exercises. • A set of essay/presentation topics.

Student Work (course requirements) Course-work requirements: 3 pieces of written work and one team presentation.

For each topic, two kinds are course-work are set: A set of exercises and essay/presentation topic(s).

For each student, coursework must: • cover 4 different topics • include the ‘exercises’ element for two topics • include an essay on one topic • include a team presentation on one topic. The team will produce a handout to be published on the course web site. • be handed in according to the schedule below.

3 Schedule for handing in course-work:

Term 1

Date (week beg.) Week Hand in on Thursday the course-work related to lectures on:

20/10/03 5 Topic 1

10/11/03 8 Topic 2

24/11/03 10 Topic 3

Term 2

19/1/04 2 Topic 4

2/2/04 4 Topic 5

23/2/04 7 Topic 6

8/3/04 9 Topic 7

The presentation

Each student will be involved in at least one presentation (depending on the size of class groups, a student may be involved in more than one). The presentation is to be joint work, prepared by a group of two or three students working together. The content of the presentation is to be decided by the members of the team and should be guided by the questions set by the topic lecturer. The presentation may be organized around a combination of the exercises and the essay / presentation topics. However, if the exercises are to be used in the presentation, they must be integrated into the broader analysis of the topic. A presentation cannot consist only or mainly of a set of answers to the exercises!! If in doubt, consult the class teacher. Within each tutorial class, groups to prepare presentations will be formed at the 'Organization meetings'. The group responsible for each presentation will prepare a handout and this will be published on the course web-site (the handout may consist of the slides used for the presentation). Notes on how to prepare a presentation are available on the course web site.

The class teacher will provide written and verbal feedback on the presentation, as well as marking the three other pieces of course-work.

Assessment The course is formally assessed by a three-hour written examination with two parts. • Part A will consist of seven short-answer questions and / or problems, of which students have to answer five. These questions will have a format similar to the exercises set during the course.

4 • Part B will consist of seven questions, of which one must be answered. For each question, the examiner will provide a piece of unseen material (e.g. newspaper article, data, extract from a government report). Although this piece may be in the public domain, students will not have been pointed towards it during the course. The student is required to read the piece during the exam and demonstrate their ability to use it in conjunction with the analysis of the associated topic that has been covered in the course.

The format of the examination is specifically intended to encourage students to master the key concepts and techniques appropriate to most of the topics covered. This is tested in Part A. It is intended that students who have attended all the lectures, and read the key readings for each topic should be able to answer all of the questions in the first part of the exam.

In addition, students are encouraged to specialise, and to study in depth three or four topics. The format of Part B is designed to encourage students to think more deeply about and reflect on a smaller number of topics so that they are able to make sense of and interpret the unseen material, placing it in the context of the work they have done on the topic. Please note that the Part A mark will be capped at 80 – this reflects the limited extent to which ‘first class’ performance can be demonstrated in answers to part A questions.

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