Economic Policy

A.Y. 2021/2022
Overall hours
Learning objectives
The aim of the first module (20 hours, 3 credits, EMA students) is to outline the main set of theories used by macroeconomists to understand the effects of fiscal policy, with a focus on the economic effects of the public debt. This knowledge will help students to understand and evaluate real-world government fiscal policies.
The second part of the course (40 hours, 6 credits, EMA and SIE students) covers a selection of political economy topics, adopting both a micro- and macro-economic perspective. Specifically, it will focus on the functioning and features of the social security systems, discussing the main reforms that affected the Italian system in the last decades. Then, after having analyzed the possible reasons and tools for government intervention in the economy, we will focus on regulated markets and discuss the privatization, unbundling and market entry reforms which have involved European countries since the '80s-'90s of the last century. The final part of the course covers topics related to the economics of innovation, presenting endogenous growth models, and discussing different types of innovation policies.
Expected learning outcomes
Applying knowledge and understanding: By the end of the first module students will be equipped with analytical tools for understanding what macroeconomists mean for public debt sustainability, why it matters, the pros and cons of introducing fiscal policy rules and budgetary institutions, how to interpret and evaluate fiscal policy rules in the Eurozone.
By the end of the second module students will acquire theoretical knowledge on a wide range of political economy topics and understand the impact of State intervention in different economic areas. Specifically, the information acquired will allow students to understand the functioning of social security systems, regulated markets, liberalization reforms and innovation policies.
Making judgements: By the end of the first module, students will be able to use economic analysis to make informed judgements on whether it is desirable to revise the current fiscal policy rules of the Eurozone and to express their views on the proposals for revision.
By the end of the second module, students will be able to critically analyze the reasons and the consequences of government intervention in specific economic fields and to compare different types of reforms and policy tools.
Learning skills: Throughout the first module, topics will be presented mainly by using theoretical models, although reference to empirical evidence will be made continuously. By the end of the module, students should be able to understand and explain the economic content, assumptions, limitations, policy implications and relevance of the models presented.
Throughout the second module, topics will be discussed using both theoretical models and empirical tools, with continuous reference to the empirical evidence provided by recent scientific publications. By the end of the module, students should be able to handle various economic models and to interpret the results of empirical analyses.
Course syllabus and organization

Single session

Lesson period
Second trimester
Course syllabus
Budget balance. Automatic stabilizers. The dynamic government budget constraint. The arithmetic of debt. The intertemporal government budget constraint. Debt sustainability. Fiscal space. Ricardian equivalence. Tax smoothing. The golden rule of public investment. Deficit bias. Monetary financing and fiscal dominance. Multiple equilibria and debt crises. The dangers of large public debts. Reducing public debts. Public debt default. Fiscal rules and fiscal institutions. Fiscal rules in the Eurozone.

· Types of pension systems (paygo vs fully funded): functioning, funding schemes, return rates; computing the individual pension benefit; moral hazard in pension systems; financial equilibrium in the pension system, demographic and employment risks; main reforms of the Italian pension system; exercises.
· Regulation and competition: justifications and limits of government intervention; review of basic microeconomic and industrial economics concepts and models; regulatory reforms: privatization, unbundling, price regulation, liberalization; theoretical models of market structure: monopoly, oligopoly, competition; measuring reform impact; in depth analysis: state-owned vs private enterprises.
· Economics of innovation: the role of innovation in the economic theory; endogenous growth models; reasons and forms of government intervention to support innovation; public policies to stimulate innovation: demand- and supply-side innovation policies; empirical evaluation of public policies of innovation; in depth analysis: public procurement for innovation.
Prerequisites for admission
macroeconomics, microeconomics
Teaching methods
traditional lectures
Teaching Resources
-Bénassy-Quéré, A. et al (2019). Politica economica. Teoria e pratica. Bologna: il Mulino. Capitolo 3: Politica di bilancio, pp. 161-233; cap. 283-287 (dominanza fiscale).
-D'Antoni, M. e Nocella, G. (2021). "Le regole fiscali europee: prospettive di riforma e problemi aperti". Cap 10 in Arachi, G., Baldini, M e Toso, S. (a cura di) La finanza pubblica italiana. Rapporto 2020, Bologna, Il Mulino, 2021, pp. 199-222. The chapter can be dowloaded from the platform Darwinbooks de il Mulino (access throught the digital services of the SPES library, registration on Darwinbooks is compulsory).
-Panizza, U. (2019). "Come risolvere il problema del debito pubblico italiano: un'analisi critica delle soluzioni facili". Rivista di Politica Economica, pp. 135-157. Link: Rivista_di_politica_economica_Panizza_n1_2019_Confindustria.pdf

- Slides
- Bénassy-Quéré, A. et al (2019). Politica economica. Teoria e pratica. Bologna: il Mulino. Capitolo 9: Politiche della crescita. The chapter can be purchased online on the Pandoracampus website (il Mulino).
- Rosen, H. and Gayer, T. (2018). Scienza delle finanze. Capitolo 12: La spesa previdenziale. Oppure: J. Gruber (2018). Scienza delle Finanze. Capitolo 8: Il sistema pensionistico pubblico.
- M. Florio (2013). Network Industries and Social Welfare: The Experiment that Reshuffled European Utilities. Capitoli: 1, 2, 3.
- papers uploaded by the professor on Ariel.
Assessment methods and Criteria
Written exam with multiple choice and open questions
A mid-term exam is scheduled at the end of the first part. The exam is made up of 5 multiple choice questions and 1 open question/exercise. The exam lasts 75 minutes.
The second mid-term exam is made up of 7 multiple choice questions and 1 open question/exercise. The exam lasts 80 minutes (to sit the second mid-term students must pass the first mid-term)
General exams include 3 multiple choices and 1 open question/exercise on the first part (Prof. Santoni) and 7 multiple choices questions and 1 open questions on the second part (Prof. Castelnovo). The exams last 2 hours.
SECS-P/02 - ECONOMIC POLICY - University credits: 9
Lessons: 60 hours
Educational website(s)
Wednesday at 10-13 hh (until 22.6.22). Office hours on Wed 11/05: 10:00-12:30, 18:00-18:30.
online on MT