32624 - Applied Microeconomics

Learning outcomes

The successful student is expected to know in depth some of the main models which are relevant for applied microeconomic analysis. In particular, the student should be able to give a critical evaluation of the literature presented, master some of the analytical tools necessary to frame his own research, understand the main technical tools used in empirical micro analysis, and assess empirical applications of theoretical models

Course contents

Please note: The course, which is mainly addressed to consumption analysis,  requires students to know the main topics usually covered in a microecomics course at the undegraduate level. 

Course outline:

1. General introduction

2. Consumption and Demand

             Theory: (a) Basic issues in the theory of consumer's choice: preferences and budget constraints, demand functions and their properties; (b) Duality in consumption;

            Applications: (a) Applied consumption analysis and expenditure systems; (b) Separability and aggregation; (c)  Welfare  indices; (d) Labour supply; (e)  Durable goods.

3. Consumption choices and uncertainty

             Theory: (a) Axiomatic foundations of expected utility theory; (b)Non EU theories: basic models

             Applications: (a) Consumption CAPM; (b)Inequality indices and income distribution.

4. Topics in applied microeconomics

5. General Equilibrium 

              Theory: The basic model

             Applications: Computability and some applications

Please note: specific topics relating to point 4 will be detailed in the classroom

Readings/Bibliography

Basic theory for points 2,3 and 5 is covered in general by any microeconomics handbook, like H.Varian, Microeconomic Analysis, Norton (any edition later than the second will do); A.Mas-Colell, M.D.Whinston and J.R.Green, Microeconomic Theory, Oxford University Press, 1995; for choice under uncertainty see also J.Hirshleifer and J.Riley, The Analytics of Uncetainty and Information, Cambridge University Press. On the Applications sections, relevant material can be found in A.Deaton and J.Muellbauer, Economics and consumer behavior, Cambridge University Press. More specific references are as follows:

Demand theory: R.Blundell, Consumer Behaviour: Theory and Empirical Evidence - A Survey, Economic Journal, 98, 1988, pp.16-65; A.Deaton and J.Muellbauer, An Almost Ideal Demand System, American Economic Review, 1980, 70, 312-26; R.Blundell e T.M.Stoker, Heterogeneity and Aggregation, Journal of Economic Literature, 2005, 43, 347-91.

Consumption choices and uncertainty: R.Sudgen, New developments in the theory of choice under uncertainty, in J.D.Hey e P.J.Lambert (eds), Surveys in the Economics of Uncertainty, Blackwell, Oxford, 1987; D.Romer, Advanced Macroeconomics, McGraw-Hill, New York, 1996, ch.7; P.J.Lambert, The Distribution and Redistribution of Income, Manchester University Press, Manchester, 2001, chs. 2 &3.

Topics in Applied Micro: D.Card e A.Krueger, Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania, American Economic Review, 84, 1994, pp.772-93;   D.Whitmore, What are Food Stamps Worth?, WP 468, Princeton University, Industrial Relations Section, July 2002; R.T.Jensen and N.H.Miller, Giffen Behavior and Subsistence Consumpion, American EconomicReview, 2008, 98, 1553-77. C.T.Hsieh and E.Moretti,Can free entry be inefficient? Commissions and social waste in the real estate industry, Journal of Political Economy, 2003, 111, 1076-1122;V.K.Viscusi, The value of risk to life and health, Journal of Economic Literature, 1993, 31, 1912-46.

General Equilibrium: H.Scarf, The Computation of Equilibrium Prices, in A.P.Kirman (ed), Element of General Equilibrium Analysis, Blackwell, Oxford, 1998.    

Teaching methods

Lectures plus classes in lab

Assessment methods

written test

Office hours

See the website of Corrado Benassi