Applied Economics (Econ203)
This course is for second year students who have successfully completed Econ 101/102.
Course Director & lecturer: Dr Steve Bradley, Room B28 Management School
Ext. 93880
Tutor: Dr Hilary Ingham, Room B30 Management School
Ext. 93925
The main method of communication by the department is the Part 2 notice board (located outside room B34, Management School). This should be consulted at regular intervals.
Course aims and objectives: The aim of this course is to integrate intermediate economic theory, statistical methods and the interpretation of data to analyse applied economic issues of current policy importance. The first part of the course is taught via lectures and tutorials. In the second part of the course students are given the opportunity to prepare a 5,000-word dissertation on an applied topic of their choice. Students will be prepared for the dissertation by attending four workshops, and will then be supervised in groups of four by a member of staff.
Key skills: to understand and be able to apply intermediate microeconomic and intermediate macroeconomic concepts to the analysis of economic problems; to be aware of applied economic issues; to be able to evaluate policy interventions; to learn how to conduct a piece of research and complete a dissertation; to be able to interpret and evaluate statistical evidence and, where appropriate, apply statistical techniques in the dissertation.
Course structure: This course is split into two terms. In the first term students will have five lectures on applied microeconomic issues and five applied macroeconomic issues. Students will also attend a weekly tutorial, where they will deliver at least one 20 minute presentation on one of the topics indicated below. You are strongly advised to attend all lectures. Tutorials are compulsory. Tutorials will be allocated at the beginning of term. In the second term students will attend four one-hourly workshops, which will prepare students for the dissertation phase. This will commence in the Lent Term. Students must select and agree a topic for their dissertation by the end of week 2 of the Lent term. They will then be allocated a supervisor.
Course assessment: Students must complete a 10,000 word dissertation and a final exam on all the material covered during the first term. The dissertation counts 50% and the final examination 50% in the calculation of your final mark. The dissertation is compulsory and must be completed and submitted by 4pm, Friday week 1 of the Summer term.
Late submission of the dissertation: it is a university rule that coursework which is submitted up to one week late is subject to a 10 point penalty, unless an extension has been previously granted. All work submitted more than one week after the notified deadline is given a mark of zero.
If you have reason to apply for an extension beyond the coursework deadline, you must complete an extension request form (obtainable from Vicki Shaw in B34 MS), and obtain the signature of the Head of Department or his/her nominee.
Part 1: Lecture programme – Michaelmas Term
Lectures are available from my personal website.
Applied microeconomics:
Lecture 1 The changing structure of the UK economy
Crafts, N. (1993) Can de-industrialisation seriously damage your wealth? Hobart
Paper 120, IEA.
Griffiths, A. and Wall, S. (2001) ‘Changes in the UK economic structure’, chapter 1
in Griffiths and Wall (Eds) Applied Economics, 9th edition, Pearson: Harlow.
Buxton, T., Chapman, P and Temple, P. (1994) Britain’s Economic Performance,
Routledge: London.
Sawyer, M. (2001) ‘The structure of the UK economy’, Chapter 2 in Sawyer, M. (Ed)
The UK Economy, 15th edition, Oxford University Press: Oxford.
Tutorial questions:
1. Critically appraise the alternative explanations for Britain’s long-term relative economic decline.
2. What do you understand about the concept of ‘social capability’? How does social capability impact on the performance of the economy?
Lecture 2 De-regulation and privatisation: the case of education
Bradley, S., Crouchley, R., Millington, J. and Taylor, J. (2000) ‘Testing for quasi-market forces in secondary education’, Oxford Bulletin of Economics and Statistics, 62, 357-390.
Le Grand, J (1991) ‘Quasi-markets and social policy’, Economic Journal, 101, 1256-
1267.
Glennerster, H. (1991) ‘Quasi-markets for education’, Economic Journal, 101, 1268-
1276.
Bradley, S. and Taylor, J. (2002) The report card on competition in schools, Adam
Smith Institute: London. (available from S Bradley.)
Lipczynski, J. and Wilson, J. (2001) Privatisation and regulation, chapter 12 in
Industrial Organisation: Analysis of Competitive Markets, Prentice Hall: London.
Tutorial questions:
1. What are the economic arguments for introducing market forces into the provision of secondary education?
2. Has a quasi-market been created and what are the advantages and disadvantages?
Lecture 3 Labour market performance and workforce training
Green, F. (2001) ‘Employment, wages, and unemployment’, Chapter 10 in Sawyer,
M. (Ed) The UK Economy, 15th edition, Oxford University Press: Oxford.
Booth, A. L. and Snower, D. J. (1996) Acquiring Skills: Market Failures, Their Symptoms and Policy responses, Cambridge University Press: Cambridge.
Shackleton, J. R. (1992) Training Too Much?, Hobart paper 118, IEA.
Layard, R., Machin, S. and Vignoles, A. ‘Britain’s record on skills’ (available from http://cee.lse.ac.uk/cee%20dps/ceedp23.pdf)
Van Reenen, J. (2001) ‘No more skivvy schemes? ‘Active labour market policies and the British New Deal for the young unemployed in context’, IFS, Working Paper WP01/09. (available from: http://www.ifs.org.uk/labmarket/workingpapers.shtml)
Tutorial questions:
1. What is the intermediate skills problem? Critically appraise the sources of market failure that may have given rise to this problem.
2. Have Active Labour Market Policies been a success in a) increasing employment and b) increasing the quantity and quality of workforce training?
Lecture 4 Income distribution and wealth
Jenkins, S. P. (1996) ‘Recent trends in the UK income distribution: what happened
and why?’, Oxford Review of Economic Policy, 12, 1.
Atkinson, A. B. (1999) ‘The distribution of income in the UK and OECD countries in
the twentieth century’, Oxford Review of Economic Policy, 15, 4.
Sawyer, M. (2001) ‘The distribution and re-distribution of income’, Chapter 11 in
Sawyer, M. (Ed) The UK Economy, 15th edition, Oxford University Press: Oxford.
Griffiths, A. and Wall, S. (2001) ‘Distribution of income and wealth’, chapter 12
in Griffiths and Wall (Eds) Applied Economics, 9th edition, Pearson: Harlow.
Jarvis, S & SP Jenkins (1997), 'Low income dynamics in 1990s Britain', Fiscal
Studies, vol 18, pp 123-42.
Machin, S (1996), 'Wage inequality in the UK', Oxford Review of Economic Policy
vol 12, pp 47-64.
Tutorial Questions:
1. How has the distribution of income varied over the twentieth century in the UK?
2. Is the pattern of wage inequality different in the UK compared to other OECD countries?
Lecture 5 Economics of the environment
Griffiths, A. and Wall, S. (2001) ‘Economics of the environment’, chapter 10
in Griffiths and Wall (Eds) Applied Economics, 9th edition, Pearson: Harlow.
Eaton, B. C., Eaton, D. F. and Allen, D. W. (1995) Asymmetric information, the rules
of the game, and externalities, Chapter 18 in Microeconomics, 4th edition, Prentice
Hall: Ontario.
Bowers, J. and Nash, C. (2001) ‘Environmental and transport policy’, Chapter 12 in
Sawyer, M. (Ed) The UK Economy, 15th edition, Oxford University Press: Oxford
Tutorial questions:
1. What are the environmental consequences of traffic congestion?
2. Critically appraise the alternative policies available to control environmental pollution by firms.
Applied macroeconomics
Lecture 6 Unemployment & inflation
Bean, C. R. (1994), 'European unemployment: a survey', Journal of Economic Literature, vol 32, pp 573-619.
Mankiw, N. G. (2000) Macroeconomics, Harvard University: Worth, 4th edition,
chapters 6 & 7.
Blanchard, O. and Wolfers, J. (2000) ‘The role of shocks and institutions in the rise of
European unemployment: The aggregate evidence’, Economic Journal, 110, pp C1-C33.
Nickell, S & B Bell (1995), 'The collapse in demand for the unskilled and unemployed across the OECD, Oxford Review of Economic Policy, vol 11, pp 40-62.
Nickell, S & van Ours, J. (2000), 'The Netherlands and the United Kingdom: a European unemployment miracle?’, Economic Policy, April, pp 137-180.
Tutorial Topics:
1. Has there been a European unemployment miracle?
2. Has inflation been tamed?
Lecture 7 The economics of regional trading blocs
Hitiris, T. (2001) ‘The UK and the European Union’, Chapter 3 in Sawyer, M. (Ed)
The UK Economy, 15th edition, Oxford University Press: Oxford.
Molle, W. (1990) The Economics of European Integration: Theory, Practice and
Policy, Dartmouth: Aldershot, chapters 5 and 6.
Read, R. and Bradley, S. (2001) ‘The economics of eastern enlargement of the EU’,
Industrial Relations Journal, 32, 380-400.
Baldwin, R. E., Francois, J. F. and Portes, R. (1997) ‘EU enlargement: small costs for
the West, big gains for the East’, Economic Policy, April, 127-76.
Boeri, T. and Brucker, H. (2001) ‘Eastern enlargement and EU labour markets:
perceptions, challenges and opportunities’, Discussion Paper 256, IZA Bonn.
(available at http://www.iza.org/)
Tutorial questions:
1. What are the short-term static gains of membership of a customs union and a common market? Are there any long-term gains?
2. Critically appraise the case for and against EU enlargement? Will there be any effect on the British economy?
Lecture 8 Britain and EMU
De Grauwe, P. (2000) Economics of Monetary Union, 4th edition, Oxford University
Press: Oxford.
Hitiris, T. (2001) ‘The UK and the European Union’, Chapter 3 in Sawyer, M. (Ed)
The UK Economy, 15th edition, Oxford University Press: Oxford.
Bradley, S. and Whittaker, J. (2000) ‘Britain, EMU and the European economy’, Industrial Relations Journal, 31, 261-274.
Artis, M. (2000) ‘Should the UK join EMU?’, National Institute Economic Review,
171, 70-81.
Bank of England website http://www.bankofengland.co.uk/Links/setframe.html for
up-to-date information on the euro
Tutorial questions:
1. What are the ‘five economic tests’ that the Labour Government has set vis-à-vis Britain’s entry to the EMU? Can they ever be met?
2. Critically appraise the economic case for and against Britain’s entry to the EMU.
Lecture 9 Economic growth and development
Harrington, R. L. (2001) ‘The UK economy in context’, Chapter 1 in Sawyer, M. (Ed)
The UK Economy, 15th edition, Oxford University Press: Oxford.
Mankiw, N. G. (2000) Macroeconomics, Harvard University: Worth, 4th edition,
chapters 4 & 5.
Todaro, M. P. and Smith, S. C. (2002) Economic Development, Addison Wesley:
London, 8th edition.
Barro, R. J. and Sala-I-Martin, X. (1995) Economic Growth, McGraw-Hill: London.
(especially chapter 12).
Tutorial questions:
1. Critically appraise the alternative definitions of the term ‘development’. Why is a purely economic definition of this term inadequate?
2. Are the economic growth rates of developing countries converging on those of the developed countries? If not, why not?
Lecture 10 Managing the economy
Griffiths, A. and Wall, S. (2001) ‘Managing the UK economy’, chapter 24
in Griffiths and Wall (Eds) Applied Economics, 9th edition, Pearson: Harlow.
Mankiw, N. G. (2000) Macroeconomics, Harvard University: Worth, 4th edition,
chapters 14 & 15.
Bank of England http://www.bankofengland.co.uk/Links/setframe.html for a
description of the Monetary Policy Framework.
Bank of England (2002) Inflation Report – see website
http://www.bankofengland.co.uk/Links/setframe.html
Tutorial questions:
1. Why have Governments shifted towards the use of Monetary policy as a means of controlling the economy? What is the new Monetary Policy Framework established in the UK in 1997?
2. With reference to the latest Inflation Report, critically appraise the Government’s current policy of low interest rates.
Part 2: DISSERTATION
Workshop 1: The methodology of economics
Workshop 2: Writing a dissertation
Workshop 3: Cross-sectional analysis
Workshop 4: Time series analysis