Intranational Economics Fall 2020

Steve Craig and Bent Sorensen

The purpose of the class is to develop ideas for research papers. The work will be at the intersection of public finance and macroeconomics. State and local governments are rich sources of data. In particular, we aim to focus on the dynamics of state/local governments' behavior. One initial idea is to consider the dynamic interaction of house prices and government policy---our first idea is to look at school spending where state-level reforms provide exogenous variation. It is ``common knowledge'' that better schools attract wealther residents, but can we pin down such a dynamic pattern using time series methods? We stress that the class is about developing ideas and the topic may change (a little, or a lot) as we learn together.

We will narrow down one or more topics as we go along (students can draft a paper on their own or in groups. In the past a subset of students have written a publishable paper with us (see below), but getting to a publishable paper takes a long time and we do not insist on you doing this. To pass the class, you have to participate in discussions, present preliminary work, and turn in a paper-draft at the end of class. (Ideally, this will turn into a chapter in your thesis, but that is not required.) We will assign a grade based on your overall performance (mainly the effort you put into the paper-draft.) We will list topics/papers on this WEB-page as we go along. (Papers listed at available in JSTOR if nothing else is said.) Please download papers for class and read/skim ahead of time.

We will cover econometric/theory tools as we go along. We will assign tasks/homeworks. In particular, we will ask you to download data and/or do preliminary data work and (later) econometric regressions.

Plan for the first couple of weeks (we may change things around):

August 24^th: Start of class.

August 26-31^th: Steve talks about the paper coming out of this course in 2013 : Steven G. Craig, Wided Hemissi, Satadru Mukherjee, and Bent E. Sorensen (Journal of Urban Economics, May 2016). "How do politicians save? Buffer-stock management of unemployment insurance finance."
This paper is an application of dynamic consumer theory to the public budgets. The finding is that state governments in the context of the state-federal unemployment insurance system behaves like rational none-too-impatient agents. We believe that other applications of this approach might be successful.
We may also outline the Barro tax-smoothing model

August 31^th: Bent talks about the consumer model underlying the paper paper that Steve presented and discuss some of the econometric issues involved.

Sep 2^th: Bent talks about (size and ) cyclicality of state/local budgets. Sorensen, Wu, Yosha (2001).
This paper gives a background for work on public/local government data.

September 4^th: Steve talks aboutBautista, Craig, Hsu, S{\o}rensen, Tanwar, and Verma (2020)
This paper coming out of the 2018 class uses the same model as the first paper but some more advanced econometrics. Bent will talk about this. This paper is about ready to be submitted, but we may wait for your comments.

September 9^th: Sted talks about paper coming out of this course in 2015 ( in revision for the Review of Economic Dynamics) Biolsi, Craig, Dhar, Sorensen (20w0)
This paper estimates the extent of risk sharing between school districts and state governments. The dataset is large and there are possibilities for extending and/or complementing this paper. One of the ideas mentioned would be to interact some of this data with house prices. The paper is ready to be resubmitted, but we may wait for your comments.

Sep 14^th: Bent talks about some of the modeling/econometrics issues in the paper presented.

September 16^th: Students should report on preliminary data exploration (locating datasets, downloading, and producing descriptive statistics.

September 21^th: Steve talks about Gramlich and Rubinfeld ``testing'' the Tiebout 1956 model (JPE1982). Very famous background paper.

September 23^th: Bent talks about Risk Sharing Between Countries and Regions" Teaching slides. There is enough for two classes, although we may decide to not go through all the slides. The basic papers that the notes build on are Channels of Interstate Risk Sharing: US States 1963-1990, QJE 1996 and International Risk Sharing and European Monetary Unification J. of International Economics 1998

Note: The schedule is tentative. If we come across something more exciting we will switch our focus to this, or if we find something unexpected in the data, we will work on this for a while. For the latter part of the semester, talking about results and data have first priority, but we will also talk about new papers we come across. We hope we can meet outside and talk about research when we get into October when the temperature and, we hope very much, COVID-19 infection rates both are in decline.