EAE 313: Public Finance Notes and Course Content


Lecture One: Introduction and the nature of public finance

  • Definition of public finance
  • The scope of government activities
  • The needs for public sector
  • Reasons why government should participate in economic activities
  • Models of efficient allocation and Measuring the size of public sector
  • The size of the public sector
  • The principles of maximum social benefits

Lecture Two: Public policy objectives

  • Introduction
  • Public sector objectives (the allocation function; public provision of social goods; the distribution function; fiscal instruments of distribution policy; the stabilization function)
  • Instruments of stabilization policy
  • Coordination and conflict of interest.

Lecture Three: Public goods

  • Properties of public goods
  • Difference between public goods and private goods
  • Comparison between efficient provision of public and private goods

Lecture Four: Market failure and the rationale for government intervention

  • Sources of market failure (Imperfect markets; costly information; externality as a cause of market failure)
  • Implications of externalities for allocation efficiency
  • Solutions to externalities

Lecture Five: Public expenditure

  • Definition of public expenditure
  • Canons public expenditure
  • Reasons for the growth of public expenditure
  • Restraints to the growth of public expenditure
  • Consequences of the growth of public expenditure
  • Effect of public expenditure
  • Public expenditure and economic stability in advanced economies
  • Theoretical aspects to public expenditure evaluation
  • Types of public projects; types of benefits and costs; shadow pricing and market item; decisions involving long-term projects; choice of discount rate; capital budgeting techniques

Lecture Six: Budget

  • Canons of budgeting
  • Types of budget
  • Incremental budgeting
  • Zero base budgeting
  • Performance and programming budgeting system

Lecture Seven: Taxation as a source of revenue

  • Canons of good tax system
  • Approaches to equity
  • Benefit principle
  • Ability to pay as basis for taxation
  • Categories of taxes
  • Shifting and incidence of tax
  • Magnitude of tax burden
  • Types of tax incidences
  • Effects of tax incidence on market for goods
  • Other factors that affect effective incidence of tax

Lecture Eight: Alternative sources of public revenue

  • Theory of Public debts
  • Classification of public debt
  • Why is public debt incurred
  • Sources of public borrowing
  • Economic effect of public borrowing
  • Effects of public debt
  • Burden of internal and external debt
  • Redemption of public debt
  • Public borrowing requirement
  • Government induced inflation

Lecture Nine: Privatization

  • Mechanism of privatization
  • Case for privatization
  • Case against privatization.

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