Public Economics

Public economics focuses on the design of government tax and expenditure policies and on the economic effects of these policies. Undergraduates interested in this area may take an introductory course in public economics, and pursue related studies in environmental economics. Graduate students enroll in a two-semester public economics sequence and also have the option of a third “topics” course. Several recent Ph.D. students have received National Tax Association or National Academy of Social Insurance awards for outstanding dissertations. 

Several faculty members specialize in public economics. Peter Diamond has wide-ranging interests in the design of both social insurance programs and tax systems. Amy Finkelstein focuses on the interplay between private and public insurance markets, with particular emphasis on health insurance, long term care insurance, and annuities that provide retirement income. Mikhail Golosov works on the optimal design of tax and income support systems in dynamic economies with information imperfections. Michael Greenstone studies the impact of environmental regulation and the value of environmental amenities. Jonathan Gruber studies how social insurance programs affect household behavior. James Poterba examines various issues in tax policy, with particular emphasis on the design of saving incentives and the impact of tax rules on household portfolio behavior. Iván Werning works on the optimal structure of taxation with a focus on intertemporal issues such as capital income taxation. William Wheaton studies the dynamics of housing markets and issues in local public finance. He also serves as Director of Research of MIT’s Center for Real Estate and teaches a course in urban economics for graduate students. Students planning to specialize in urban economics combine this course with another course in public economics to create a two-course sequence.