ICB0047: PUBLIC FINANCE

1.1 Background and Rationale

This course provides a broad, up-to-date introduction to the economic
analysis of public policy issues. The focus of the course, which draws on
microeconomic theory, is on the development of analytical tools and their
application to key policy issues relating to the spending, taxing and financing
activities of government. Particular emphasis is given to recent
developments in public economics, including findings from current research,
in areas such as behavioural public economics, new empirical methods and
policy innovations.

1.2 Learning Outcomes

At the end of the course, students will be expected to:
(a) Discuss critically key issues in public economics, informed by recent
research.
(b)Present a coherent argument orally and in writing on topics in public
economics.
(c) Demonstrate a familiarity with a range of policy issues and relevant
analytical and empirical tools.

1.3 Course Content

1.0 Macro
Government and Development role of external markets.
Fiscal Policies and their macroeconomic linkages.
Zambian economic problems and their fiscal policy linkages.
Role of market and policy failure. Aspects of the Black economy in India
causes, measurement, etc.
Budgetary Process in India.
Revenue and taxation. Direct and Indirect Taxes, Borrowing, Public
Sector resources, DTC, GST, etc.
 Expenditure Policies. Capital and Revenue Accounts. Investments,
subsidies, defence expenditures, interest payments, loans and grants,
etc.. Social and Physical infrastructure
Centre, States and Local Body issues. Transfer of resources. Finance
Commissions.
Resource mobilization and resource shortage.
Possible Alternative policies and underlying fiscal policies.
2.0 Normative Public Finance
General Equilibrium Model and Normative Public Finance; Key features
Public Goods and government intervention
Externality of different kinds and application to Air and Water Pollution
and clean up.
Free Rider Problem and Benefits Received Principle of Taxation.
Increasing Returns to Scale, Government intervention, role of
subsidies, Average and Marginal cost pricing, regulation and Averch-
Johnson Effect.
Second Best, Nature of state Intervention and Optimum Taxation.

1.4 Assessment
Continuous Assessment 20%
Research 30%
Final Examination 50%

1.5 Prescribed Textbook

1 Breton, A. 1974. The Economic Theory of Representative
Government. London: Macmillan.

1.6 Recommended Textbooks

1. Atkinson, A.B. and Stiglitz, J.E. 1980. Lectures in Public Economics.
London: McGraw Hill.
2 Musgrave, R.A. and Musgrave, P.B. 1976. Public Finance in Theory
and Practice. 2nd Edition. New York: McGraw.
3 Howard, M. 2009. Public Sector Economics for Developing
Countries: 2nd Edition. Mona, Jamaica: UWI Press.
4 Richard W. T. 2008. Public Sector Economics, New York: Palgrave
Macmillan.
5 Harvey S. R. and Gayer T. 2013. Public Finance, Tenth Edition, New
York: McGraw- Hill/Irwin.
6 Gruber J. 2016. Public Finance and Public Policy, Fifth Edition, New
York: Macmillan Learning.
7 Karl E. C. 1986. Economics and Tax Policy, Boston: Oelgeschlager,
Gunn & Hain.
8 Richard G. 2004. Government Finance in Developing Countries,
Washington, D.C.: The Brookings Institution.
9 Prest A.R. 2015. Public Finance in Developing Countries, Third
Edition, New York: St. Martins Press.
10 Stephen L. Jr. 2013. Taxation for Development: Principles and
Applications, New York: Oxford University Press.
11 Newbery D. and Stern N. 2012. The Theory of Taxation for

Developing Countries, New York: Oxford University Press for the

World Bank.