Public and institutional economics has had a strong standing at the department over the past 60 years. The interest in the subject derives from the early Swedish work in the area and the large public sector arising from the creation of the welfare state. 

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There has been notable theoretical contributions to the economics of natural resources, taxation and the theory of justice as fairness and a variety of applications to areas such as industrial organization, taxation, pension systems, health economics, labour economics.

More recently, scholars from Lund have done research on areas such as the effects of taxation, public sector reform (in particular pension reform), local government in Sweden and the expansion of the welfare state. Research in institutional economics in Lund involves among other things economic freedom, corruption and social trust.