Monday, January 16, 2012

Syllabus for SSE 512 Public Economics

Master of Arts in Economics
Department of Economics, School of Social Sciences
DOON UNIVERSITY
SSE 512 Public Economics
Credits-04
Winter Semester 2012
Course Instructor: Siba Sankar Mohanty

Introduction:

The course is designed to equip students in broad arenas of public finance and some other selected topics in public sector economics. An emphasis of the course is also on impact analysis of impact of public policies on resource allocation and distribution in the economy. In this course, market failure is presented as a justification for government intervention and public action. At the end of the course, students are expected to be able to analyse the manner and extent to which government policies may improve market outcomes through facilitation and regulation. While the overall emphasis is on the role of public sector of the third world economies, the students will be exposed to the peculiarities of the Indian context through assignments and seminars

Evaluation Process:

The evaluation of progress of students shall be made as per the distribution below

Written (unseen) examinations : 85 marks
Seminars and Class Performance: 5 marks
Assignments /Term Papers: 10 marks


Unit-I: The Economic Basis of Government Activity and Public Economics (Total Number of Contact hours-15)

Market Failure, information and the role Role of the Government
Markets: The Exchange Economy, The Edgeworth Box, Pareto Optimality, Competitive Equilibrium, Fundamental Theorems of Welfare Economics
Exchange Economy: Utility Functions, The Marginal Rate of Substitution, Pareto Optimal Allocations and Competitive Equilibrium
The Production Economy: Pareto Optimality, Competitive Equilibrium with examples, Production Efficiency
Consumer and Producer Surplus, The Welfare Cost of Intervention, Market Interactions
Externalities: Externalities and Negotiation, Negotiated Compensation, Negotiation limits, Government Intervention
Permit Trading: Environmental Pollution and Abatement, Direct Emissions Controls,
Common Property Resources: Renewable Common Property Resources, Static and Dynamic Common Property Problem, Extinction
Co-ordination Failures:Co-ordination Game, Co-ordination Game with Uncertainty

Unit-II: Public Goods and Government Activities: Issues in Taxes  (Total Number of Contact hours-15)

Public Goods: Pure Public Goods, Optimal and voluntary Provision of a Public Good, Issues in Non-Excludability, Examples of Pure Public Goods, Knowledge, Income Redistribution, Impure Public Goods, Variable-Use Public Goods

The Link between Public Goods and Externalities: Interdependent Preferences: Indifference Curves and Pareto Optimal Allocations, Goods with Positive and negative externalities

Market Srtuctures: Imperfect Competition, Natural Monopoly, Rent-Seeking Behaviour, Pricing Rules under Imperfect Competition, Marginal Cost Pricing, Differentiated and Undifferentiated Goods, Marginal Cost Pricing and Economic Efficiency

Taxation and Efficiency: Taxation, The Welfare Cost of Tax Interactions - Welfare Cost Calculations, The Theory of the Second Best, Optimal Taxation, Natural Monopoly and the Ramsey Pricing Rule

Unit-III: Asymmetric Information, Income Distribution and limits to Government Action (Total Number of Contact hours-15)

Asymmetric Information and Efficiency: Asymmetric Information: Adverse Selection, Moral Hazard, Preference Revelation, The Groves–Clarke Mechanism
Regulation of a Natural Monopoly, Natural Monopoly with a Role for Management, Full Information, The Consequences of Asymmetric Information, Menu adjustment, Optimal Regulation under Asymmetric Information, Examples: Health Care and Health Care Insurance, Standard Debt Contract, Efficiency Wages
The Limits to Income Redistribution: Economy with Self-Selection, Redistributive Policies, Welfare and Pareto Efficient Taxation, Tagging and Targeting
The Role of Government in a Market Economy: Repair of Market Failures, Redistribution of Income, The Limits on Government Action

Unit IV: Fiscal Policiy and Public Finance (Total Number of Contact hours-15)

Concepts and Applications of Program Budgeting, Zero-Based Budgeting, and Budgeting Policies-Theoretical Backgrounds
Fiscal Policy with Special Reference to LDCs, Federal-Fiscal Relation in India.
Social Security: Demographic Changes and the future of Social Security, The Impact of Social Security on Savings and work incentives, Government subsidies and Income support: The basis and Trade-off.

Assignments, Seminars and Projects

Indian Finance –Trends in Revenue and Expenditure of the Government of India,
State Finances-- Trends in revenue and expenditure of the state governments,
Union State Financial Relations-- Horizontal and vertical imbalances; the Finance Commissions
Fiscal Policy and Fiscal  Reforms in India

References

Textbook Mandatory for Unit-1, 2 and 3:  John Leach , (2004) A Course in Public Economics , Cambridge University Press


Suggested Reading List

1. Bowers, P.F. (1974): Private Choice and Public Welfare, Dryden Press, NY.
2. Buiter, W.H. (1990): Principles of Budget and Fiscal Policy, MIT Press.
3. David, N. and Nicholas, S. (eds.) (1987): The Theory of Taxation for Developing Countries, OUP.
4. Hyman, D.N. (2007): Public Finance: A Contemporary Application of Theory to Policy, Thomson Asia Pvt. Ltd., Singapore.
5. Jha, Raghbendra (1987): Modern Theory of Public Finance, Wiley Eastern, Delhi.
6. Maxdowell, A., Anderson and J. Richard (1973): Financing State and Local Governments.
7. Musgrave, Richard A. (1959): The Theory of Public Finance, Tata McGraw Hill, N.Y.
8. Mishra, B. (2006): Economics of Taxation: Theory and Application, Akansha Publishing House, ND.
9. Prest, A.R. (1975): Public Finance in Theory and Practice, Weidenfeld and Nicholson, London.
10. Ursula, H. (1968): Public Finance, James Nisbet and Co., London.

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