Basic knowledge of microeconomics, at the level delivered during the first year course of Economics. Diagrammatic representation of linear and quadratic equations.
Course objectives and expected students’ achievements
The first two parts of the course illustrate the rationale for public intervention in a market economy, the role of public administrations in the provision of public goods and services, the principles underlying a “good” tax system. The third part of the course examines public policies in the tourism sector and the relations between tourism and the natural environment.
In terms of students achievements, the expected results are the following:
- ability to use concepts, terms and methods of economic theory applied to the study of the economic activity of public administrations, both on the expenditure and on the revenue side;
- ability to interpret the relations between public and private sectors in modern market economies;
- ability to provide original interpretations of facts and news (like those reported by the press or by other media) regarding the economic activities of public administrations (e.g., introduction of new taxes, changes of tax rates and tax basis; spending reviews) by means economic theory and models.
The first part of the course is devoted to the tax system, the second to public expenditure programs, and the third to public policies for tourism and sustainable tourism.
Tax systems (about 18 hours of teaching)
Tax systems: overview
Types of tax instruments. Properties of a “good” tax system. The Italian tax system. Comparisons with some OECD countries. Comparison between benefit principle and ability to pay principle.
(Balestrino, Galli, Spataro, part V, chapter 1; Handout I, sections 1, 2 and 3. Slides 1)
Personal income tax and tax progressivity
Ability to pay as a principle for taxation. The instruments employed to implement a progressive income tax: tax rates and income brackets, tax allowances and tax credits. Evolution of the Italian personal income tax (Irpef). Progressivity measures and analysis of the redistributive impact of PIT by means of Lorenz curves.
(Handout I, section 9. Balestrino, Galli, Spataro, part V, chapter 3; Slides 2, 3 and 4)
The impact of taxes on the behaviour of economic agents
Labour supply, income tax, and excess burden. Harberger’s triangles. Optimal tax theory (sketch). Criticisms to the neoclassical model of labour supply. (Balestrino, Galli, Spataro, part V, chapter 2; Handout I, sections 4.2 and 4.3)
Tax shifting and tax incidence
Incidence of indirect taxes in perfectly competitive markets. The structure of VAT in the EU. Excises on tobacco products, fuels and alcoholic drinks.
(Balestrino, Galli, Spataro, part V, chapter 2; Handout I, section 11)
Direct versus indirect taxation
The role of income and consumption taxaes in a modern tax system.
(Balestrino, Galli, Spataro, part V, chapter 3)
A case study: the accommodation tax in Italy
(Federalberghi Report on L’imposta di soggiorno)
Public goods (about 18 hours of teaching)
Introduction to welfare economics
Pareto efficiency. Efficiency in a barter economy and in a market economy under perfect competition. The first theorem of welfare economics. Market failures (monopoly, externalities, asymmetric information: sketch). (Handout II, sections 1 to 7)
Public goods and market failures
Types of public goods: definitions and examples. (Handout II, section 8)
Pure public goods
Market failures in an economy with pure public goods: the free-rider problem. “Private” solutions to market failures: the Coase theorem. Efficiency in the provision of public goods. Rules governing social decisions about public goods provision and failures of public intervention. (Handout II, section 9)
Non-excludable public goods
The “tragedy of the commons”. Solutions to market failures in the presence of non-excludable public goods: monopoly, property rights, pigouvian pricing. Application to road pricing. (Handout II, section 10)
Excludable public goods
Tourism services and cultural products (hospitality, museums, transports). Market failures in the presence of excludable public goods: perfect competition and monopoly. Pricing strategies in markets for excludable public goods. (Handout available on the e-learning platform)
Public finance and tourism (about 14 hours of teaching)
Public policies in the tourism sector
Public “goods”, public “bads”, and externalities, in the tourism products. Taxation of tourism activities, with particular reference to the tourist tax. (Candela-Figini, chapter 14)
The concept of sustainable tourism. The notion of load-capacity of a tourism destination. (Candela-Figini, chapter 15)
Types of teaching activities
50 hours of classroom teaching, all delivered by the professor in charge of the course.
Teaching material and references
For the first part of the course (tax systems), the references are the textbook by Balestrino A., Galli E., Spataro L., Scienza delle finanze, UTET, Torino (prima edizione 2015) and the Handout I (Dispensa I) by Galmarini Umberto and Giarda Piero, Analisi delle Imposte: Efficienza, Equità e Incidenza (downloadable from the e-learning platform). For the accomodation, or hotel, tax (imposta di soggiorno), see the Report by Federalberghi, Osservatorio sulla Fiscalità Locale, L’Imposta di Soggiorno, July 2015 (the report is updated twice a year and can be downloaded from www.tourismthinktank.net).
For the second part of the course (public goods), the reference is Handout II (Dispensa II) by Galmarini Umberto, Mercati, Efficienza, Fallimenti del Mercato e Intervento Pubblico (downloadable from the e-learning platform).
For the third part of the course (tourism public policies), the references is Candela Guido e Figini Paolo, Economia del Turismo e delle Destinazioni, McGraw-Hill, Milano (seconda edizione 2010).
Slides (Lucidi) used during lectures are also available on the e-learning platform.
The exam is written; it is possible, for foreign students, to use English as writing language. The exam paper contains 6 questions, 3 from each part of the course; the student is required to answer to 3 questions, of which at least one from each part of the course. Questions are about the illustration of economic concepts and definitions, the exposition of economic models, the interpretation of data, the solution to numerical problems. The written exam lasts for about 90 minutes. Students successfully taking the written exam are admitted to a brief oral exam, by which the final mark is determined. The publication of the results of the written exam is preceded by the exposition of the criteria used to assess them, with analytical illustration of all questions.
The examination is aimed at assessing the ability to apply rigorous economic reasoning to the topics covered in the course, as well as the ability of exposition and the use of appropriate terms. Since the course is taught to second year students, the assessment criteria include the ability to express autonomous judgments, albeit in a limited scope, given the complexity of the discipline.