Preface

More than a decade has passed since the publication of the last volume of the Handbook of Public Economics, and with the evolution of the field and appearance of many important contributions there are many worthwhile topics to include in Volume 5.

The first chapter, by James Andreoni and Abigail Payne, considers the determinants of charitable giving. These include, of course, the tax price familiar from the classic public finance literature on the subject, but the more recent literature considers many novel issues to help us understand what gives rise to such potentially altruistic behavior.

In Chapter 2, Timothy Besley and Torsten Persson evaluate the role of taxation in economic development. A backdrop is the fact that mature developed countries have much larger public sectors and very different tax systems than developing countries. With this frame of reference, the chapter explores the interplay between economic development and the evolution of tax systems, with political institutions playing an important role in determining the process.

Raj Chetty and Amy Finkelstein present and discuss important strands in the literature on social insurance in Chapter 3, emphasizing empirical work aimed at evaluating theoretical predictions. The chapter consists of two parts, developing theoretical models of selection in insurance markets and the impact of government intervention and then describing work aimed at empirical testing of the predictions of theory.

Urban Public Finance is the subject of Chapter 4, by Edward Glaeser. Distinct from the areas of fiscal federalism and local public finance (as considered in the chapters by Rubinfeld, v. 2, and Scotchmer, v. 4), which focus on intergovernmental relations and the sorting of individuals among communities but devote relatively less attention to what happens within cities, the research this chapter reviews focuses more on the special role played by large urban areas, bringing together work in public finance and urban economics.

Earlier volumes of this Handbook have included chapters on taxation in open economies (Dixit, v.1 and Gordon and Hines, v.4), but not specifically on the phenomenon of international tax competition, analyzed by Michael Keen and Kai Konrad in Chapter 5, which arises as governments seek to attract productive economic activity and tax bases. With increasing cross-border economic activity and factor mobility and the rise of multinational companies serving as motivation, an active literature has developed on both the positive and normative aspects of tax competition, including the potential for policy coordination.

The transmission of wealth to successive generations is of considerable interest to economists because of the various factors that may determine the bequest motive and the potential impacts on the behavior of individuals on both sides of the bequest. Wealth transfers are also of considerable policy interest because of the role that wealth concentration may play in economic inequality. Chapter 6, by Wojciech Kopcuzk, considers the role that taxation in general and the taxation of wealth transfers in particular plays in influencing the size and timing of bequests.

In the final chapter of the volume, Thomas Piketty and Emmanuel Saez present and discuss developments in the optimal income tax literature, focusing primarily on work since that discussed in the chapters in earlier Handbooks by Stiglitz (v.2) and Auerbach and Hines (v. 3). A question of particular importance is the optimal tax rate on high income individuals, and the chapter offers an in-depth analysis of this question under a variety of modeling assumptions.

Earlier versions of the chapters in this volume were presented at a conference held in Berkeley in December, 2011, sponsored by the Robert D. Burch Center for Tax Policy and Public Finance. We are grateful to discussants at that conference for their helpful contributions and to Camille Fernandez of the Burch Center for organizing the conference and helping us to shepherd the papers into publishable form.