PUBLIC ECONOMICS

Rajalaxmi Kamath,
New Faculty Bloc - 008
Indian Institute of Management Bangalore,
Email: rajalaxmik@iimb.ernet.in
Ph: 080-26993748.
This course is concerned with the role of the Government in the economy. It will try and
cover several key issues in this area in a concise manner. It is broadly divided into the
following three modules:
I.

II.

III.

Rationale for existence of Governments [Sessions 12]

- The nature of Public Sector interventions - size of the public sector
- Economic Rationale for Government interventions, Market Efficiency and
Market Failures and Distributional Concerns
Public Expenditures theory and Practice [Sessions 3 6]
- Public sector production and provisioning
- Privatization private sector participation and partnerships
- Government social protection policies
Public Revenues theory and Practice [sessions 7 - 10]
- Economics of Taxation and Tax Incidence
- Optimal taxes and Tax Reform
- User charges versus taxes

Useful Texts:

*Stiglitz, J. E and Jay K. Rosengard Economics of the Public Sector. 4th

Edition. W.W.Norton and Company.
Rosen, Harvey S and Ted Gayer, Public Finance. 8th Edition. McGraw Hill
Hillman, Arye L. Public Finance and Public Policy. Responsibilities and
Limitations of Government. Cambridge University Press.

* I would be relying primarily, on the sequence given in the textbook by Stiglitz and
Rosengard, but in order to introduce you to its application in the Indian context, I have
added relevant journal articles and case-studies. These would be uploaded on the
moodle page created for this course titled PF 2016 (under Public Policy and
Management).
A rough, sessions-wise distribution of the topics is given below. I will intimate the class of
any changes, as and when needed.

Grading et al: Grades would be determined by:

1. Three learning notes of not more than 750 words each (20 points each -> 40
points): The students are required to prepare a 750 word write-up that answers
specific questions would be given after the end of the three modules with a 24hour mandate for submission.
2. Open-book final exam (40 points): At the end of the course, there will be an inclass, open-book final exam (covering the entire syllabus taught).

SESSIONS

TOPICS

Sessions 1
and 2

Markets and
Pareto
Optimality
the two
Fundamental
Welfare
Theorems
Equity and
Efficiency

Sessions
3, 4, 5 and
6

REFERENCES
Chapters 3 and 4 of Stiglitz
APMCs the other side of the story
http://www.thehindubusinessline.com/opinion/apmcs-the-other-side-ofthe-story/article6871346.ece
Blank, Rebecca M, When can Public Policy Makers Rely on Private Markets?
The Effective Provision of Social Services, The Economic Journal Vol 110,
No.462. March 2000

Game
Chapter 5 and 8 of Stiglitz
theoretic
approach to
Chapter 2.1 and Section 2.2.4 of Public Finance and Public Policy understanding Ayre L. Hillman (pages 63 to 85)
public goods
NPM New Public Management, a teaching note
Public sector
production
Case: The Hyderabad Metropolitan Water Supply and Sewerage Board.
and
HKS.
provisioning
Lawrence Aber and Laura B. Rawlings, North-South Knowledge Sharing
Privatization on Incentive-Based Conditional Cash Transfer Programs, Special
private sector Protection & Labor Discussion Paper No. 1101 (Washington, D.C.: World
participation
Bank, January 2011).
and
http://siteresources.worldbank.org/SOCIALPROTECTION/Resources/SPpartnerships
Discussion- papers/Social-Protection-General-DP/1101.pdf
Government
social
protection
policies

Economics of
Taxation and
Tax Incidence
Sessions
7, 8, 9 and
10

Optimal taxes
Tax Reform
User charges
versus taxes

Chapters 18 and 19 of Stiglitz

Zee, Howell H. Theory of Optimal Commodity Taxation, Tax Policy
Handbook (ed) P. Shome. IMF
Richard M. Bird and Arindam Das-Gupta, Public Finance in Developing
Countries, draft working paper, June 30, 2012.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2111065
Editorial EPW, "Still Searching for the GST 50, Issue No. 2, 10 Jan,

2015