In the "Handbook of Public Economics, vol. 5, " top scholars provide context and order to new research about mechanisms that underlie both public finance theories and applications. These fundamental subjects follow the recent, steady movement away from rational decision-making and toward more personalized approaches to tax generation and expenditure, especially in terms of the use of psychological methods and financial incentives. Closely scrutinized subjects include new research in empirical (instead of theoretical) public finance, the methods for measuring taxes (both in revenue generation and expenditure), and the roles that taxes play in specific settings, such as emerging economies, urban settings, charitable giving, and among political entities (cities, counties, states, countries). Contributors look at both the "tax" and "expenditure" sides of public finance, emphasizing recent influences that psychology and philosophy have exerted in economics with articles on behavioral finance, charitable giving, and dynamic taxation. To a field enjoying rapid growth, their articles bring context and order, illuminating the mechanisms that underlie both public finance theories and applications.
Editor Raj Chetty is the recipient of the 2013 John Bates Clark Medal from the American Economic AssociationFocuses on new approaches to both revenue generation and expenditures in public financePresents coherent summaries of subjects in public economics that stretch from methodologies to applicationsMakes details about public economics accessible to scholars in fields outside economics

The Field of Public Economics has been changing rapidly in recent years, and the sixteen chapters contained in this Handbook survey many of the new developments. As a field, Public Economics is defined by its objectives rather than its techniques and much of what is new is the application of modern methods of economic theory and econometrics to problems that have been addressed by economists for over two hundred years. More generally, the discussion of public finance issues also involves elements of political science, finance and philosophy. These connections are evidence in several of the chapters that follow.
Public Economics is the positive and normative study of government's effect on the economy. We attempt to explain why government behaves as it does, how its behavior influences the behavior of private firms and households, and what the welfare effects of such changes in behavior are. Following Musgrave (1959) one may imagine three purposes for government intervention in the economy: allocation, when market failure causes the private outcome to be Pareto inefficient, distribution, when the private market outcome leaves some individuals with unacceptably low shares in the fruits of the economy, and stabilization, when the private market outcome leaves some of the economy's resources underutilized. The recent trend in economic research has tended to emphasize the character of stabilization problems as problems of allocation in the labor market. The effects that government intervention can have on the allocation and distribution of an economy's resources are described in terms of efficiency and incidence effects. These are the primary measures used to evaluate the welfare effects of government policy.

Destined to become the standard guide to the economic policy of the United States during the Reagan era, this book provides an authoritative record of the economic reforms of the 1980s.
In his introduction, Martin Feldstein provides compelling analysis of policies with which he was closely involved as chairman of the Council of Economic Advisers during the Reagan administration: monetary and exchange rate policy, tax policy, and budget issues. Other leading economists and policymakers examine a variety of domestic and international issues, including monetary and exchange rate policy, regulation and antitrust, as well as trade, tax, and budget policies.
The contributors to this volume are Alberto Alesina, Phillip Areeda, Elizabeth Bailey, William F. Baxter, C. Fred Bergsten, James Burnley, Geoffrey Carliner, Christopher DeMuth, Douglas W. Elmendorf, Thomas O. Enders, Martin Feldstein, Jeffrey A. Frankel, Don Fullerton, William M. Isaac, Paul L Joskow, Paul Krugman, Robert E. Litan, Russell B. Long, Michael Mussa, William A. Niskanen, Roger G. Noll, Lionel H. Olmer, Rudolph Penner, William Poole, James M. Poterba, Harry M. Reasoner, William R. Rhodes, J. David Richardson, Charles Schultze, Paula Stern, David Stockman, William Taylor, James Tobin, W. Kip Viscusi, Paul A. Volcker, Charles E. Walker, David A. Wise, and Richard G. Woodbury.

The first volume of the Handbook of Public Economics contains eight essays on various topics in Public Economics by international leaders in the field. It begins with an historical perspective on the growth of the area as a whole, and subsequent essays focus on the theory and evidence about the impact of taxation on economic behavior.
The material presents an up-to-date survey of the field of public economics by those actually doing work on the frontier of the subject, and is written in a manner that renders it useful to the public finance specialist, whilst remaining understandable for the student and non-specialist.

The new chairman of President Reagan's Council of Economic Advisers, Martin Feldstein is also the leading economist in the field of tax analysis. In this important volume he shows how systems of taxation influence the rate and nature of capital formation-a key policy issue in the development of any economy. The first part of Capital Taxation deals with the overall rate of saving and examines the effects of taxes on both personal and corporate saving as well as on the interaction between the two. The second section describes the effects of tax rules on household portfolios: selection and size of investment and the process of portfolio adjustment. In Part 3, Feldstein turns to corporate investment in plant and equipment and in inventories. Part 4 analyzes the impact of capital taxation in a growing economy. Feldstein's perceptive identification of important economic and policy questions, adroit use of modeling and new data sources, and careful attention to dynamics make this book a powerful addition to the economic literature.

Social security is one of the largest and one of the most popular programs administered by the United States government. It is also under significant pressure to reform: given projected increases in both individual life expectancy and the sheer number of retirees, the current system faces the possibility of an eventual overload. Alternative proposals have emerged, ranging from reductions in future benefits to a rise in tax revenue to various forms of investment-based personal retirement accounts.
As this volume suggests, the distributional consequences of these proposals are substantially different, and may disproportionately affect those groups who depend on social security to avoid poverty in old age. Together, these studies persuasively demonstrate that appropriately designed investment-based social-security reforms could effectively reduce the long-term burden of an aging society on future taxpayers, increase the expected future income of retirees, and mitigate poverty rates among the elderly.

Social Security in the United States and in Europe is at a critical juncture. Through the essays assembled in "Social Security Pension Reform in Europe," Martin Feldstein and Horst Siebert, along with a number of distinguished contributors, discuss the challenges facing Social Security reform in the aging societies of Europe. A remarkable range of European nations--Germany, France, Finland, the Netherlands, Poland, Romania, Italy, Sweden, the United Kingdom, and Hungary--have implemented or are about to implement mixed Social Security systems that combine a traditional defined benefit of the pay-as-you-go system with an individual retirement account defined contribution of a capital-funded system.
The essays here highlight the problems that the European pension reform process faces and how it differs from that of the United States. This timely volume will significantly enrich the debate on pension reform worldwide.

Our current social security system operates on a pay-as-you-go basis; benefits are paid almost entirely out of current revenues. As the ratio of retirees to taxpayers increases, concern about the high costs of providing benefits in a pay-as-you-go system has led economists to explore other options. One involves "prefunding", in which a person's withholdings are invested in financial instruments, such as stocks and bonds, the eventual returns from which would fund his or her retirement. The risks such a system would introduce - such as the volatility in the market prices of investment assets - are the focus of this offering from the NBER. Exploring the issues involved in measuring risk and developing models to reflect the risks of various investment-based systems, economists evaluate the magnitude of the risks that both retirees and taxpayers would assume. The insights that emerge show that the risk is actually moderate relative to the improved return, as well as being balanced by the ability of an investment-balanced system to adapt to differences in individual preferences and conditions.

This volume represents the most important work to date on one of the pressing policy issues of the moment: the privatization of social security. Although social security is facing enormous fiscal pressure in the face of an aging population, there has been relatively little published on the fundamentals of essential reform through privatization. "Privatizing Social Security" fills this void by studying the methods and problems involved in shifting from the current system to one based on mandatory saving in individual accounts.
"Timely and important. . . . ["Privatizing Social Security"] presents a forceful case for a radical shift from the existing unfunded, pay-as-you-go single national program to a mandatory funded program with individual savings accounts. . . . An extensive analysis of how a privatized plan would work in the United States is supplemented with the experiences of five other countries that have privatized plans." --"Library Journal"
"[A] high-powered collection of essays by top experts in the field."--Timothy Taylor, "Public Interest"

This volume represents the most important work to date on one of the pressing policy issues of the moment: the privatization of social security. Although social security is facing enormous fiscal pressure in the face of an aging population, there has been relatively little published on the fundamentals of essential reform through privatization. "Privatizing Social Security" fills this void by studying the methods and problems involved in shifting from the current system to one based on mandatory saving in individual accounts.
"Timely and important. . . . ["Privatizing Social Security"] presents a forceful case for a radical shift from the existing unfunded, pay-as-you-go single national program to a mandatory funded program with individual savings accounts. . . . An extensive analysis of how a privatized plan would work in the United States is supplemented with the experiences of five other countries that have privatized plans." --"Library Journal"
"[A] high-powered collection of essays by top experts in the field."--Timothy Taylor, "Public Interest"

The tax rules of the United States and other countries have intended and unintended effects on the operations of multinational corporations, influencing everything from the formation and allocation of capital to competitive strategies. The growing importance of international business has led economists to reconsider whether current systems of taxing international income are viable in a world of significant capital market integration and global commercial competition. This volume examines the effect of tax policy on international investment choices by presenting in-depth analyses of the interaction of international tax rules and the investment decisions of multinational enterprises. Ten papers assess the role of investment by multinational firms in the U.S. economy and the design of international tax rules for multinational investment; analyze channels through which international tax rules affect the costs of international business activities; and examine ways in which international tax rules affect financing decisions of multinational firms. As a group, the papers demonstrate that international tax rules have significant effects on firms' investment and other financing decisions. This state-of-the-art volume will be of interest to researchers in public finance and international economics and to policymakers concerned with tax policy and international investment issues.

In the increasingly global business environment of the 1990s, policymakers and executives of multinational corporations must make informed decisions based on a sound knowledge of U.S. and foreign tax policy. Written for a nontechnical audience, Taxing Multinational Corporations summarizes up-to-the-minute research on the structure and effects of tax policies. The book covers such practical issues as the impact of tax law on U.S. competitiveness, the volume and location of research and development spending, the extent of foreign direct investment, and the financial practices of multinational companies. In ten succinct chapters, the book documents the channels through which tax policy in the United States and abroad affects plant and equipment investments, spending on research and development, the cost of debt and equity finance, and dividend repatriations by United States subsidiaries. It also discusses the impact of U.S. firms' outbound foreign investment on domestic and foreign economies. Especially useful to non-specialists is an appendix that summarizes current United States rules for taxing international income. The findings of this volume will be of immediate value to executives, lawyers, accountants, and all who seek a concise, thorough overview of international taxation. It is also of long-term value to scholars and policymakers as they debate reforms of international tax rules in the United States and elsewhere.

Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest.
But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans.
"International Capital Flows" contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.

Historically, tax policy debates - and reforms - have depended heavily on estimates of how alternative tax rules would affect household and firm behavior. Research showing that capital gains realizations were very sensitive to capital gains tax rates played an important role in the 1978 capital gains tax reform. The 1981 Economic Recovery Tax Act was bolstered by studies suggesting that reductions in marginal tax rates would increase household labor supply and saving. In the early 1990s, federal tax policy debates focused on how raising marginal tax rates would affect household behavior and reported taxable income. Despite decades of interest by scholars and policy makers in the effect of tax policy on household behavior, there is still considerable controversy about the key empirical links among tax rates, household behavior, and revenue collections. The eight papers in this volume present new statistical findings on how taxes affect a range of household decisions, including labor supply, saving, choice of health insurance plan, choice of child care arrangements, portfolio choice, and tax evasion. They also present new analytical results on the effects of different types of tax policy. All of this research relies on household-level data - drawn either from public-use tax return files provided by the U.S. Treasury or from large household-level surveys - to explore various aspects of the relationship between taxes and household behavior.