PUBLIC FINANCE

Course code

FIN104

Course title

Public Finance

Type of course

Main

Stage of study

Undergraduate

Department in charge

Undergraduate school

Year of study

4rd

ECTS

6; 24 hours of lectures and 24 seminars,

112 hours of individual work, 2 hours of consultations

Coordinating lecturer

Dr. Aras Zirgulis

Studies form

Full-time classes

Prerequisites

Microeconomics, Macroeconomics

Language of instruction

English

Course description
This course is a one-semester introduction to Public finance. Public finance is the branch of economics that focuses on
the role of government in the economy. In this course we will study the role and the size of public sector, including the
rationale for public sector existence (public goods, market failures) and government interventions (taxation policy, income
redistribution).
Students will become acquainted the theoretical foundations of how the government affects the economy, in addition to
being exposed to a variety of empirical research. Students will gain experience in critical thinking and will learn about the
theoretic basis of the economic arguments used by politicians.
Aims of the course
This course aims to introduce to students the main concepts of Public finance: the role of the state in the economy,
public goods and market failures, policy of taxation and income redistribution. Attention is also given to fiscal policy
issues.
Subject learning outcomes
SLO1. Analyze the concepts of public goods
and market failures and their cures
SLO2. Apply various socio-economic models
to the evaluation of the public policy questions
SLO3. Discuss the reasons for government
intervention in the economy as well as
different types of regulation
SLO4. Evaluate and compare different
policies of taxation and income redistribution
SLO5. Analyze the issues in managing the
fiscal policy
SLO6. Learn the mechanics of sovereign and
municipal bond markets

Study methods
Lectures, seminars, individual
study, self-study in groups
Lectures,
seminars,
solving
exercises, self-study in groups
Lectures, seminars, self-study in
groups

Assessment methods
Midterm test, final exam

Lectures, seminars, self-study

Midterm test, final exam

Lectures,
seminars,
solving
exercises, individual study, selfstudy in groups
Lectures,
seminars,
solving
exercises, self-study

Midterm test, final exam

Midterm test, final exam

Midterm test, final exam

Midterm test, final exam

Quality management
The lecturer assures a variety of teaching and testing methods. The feedback from students is always highly valued and
appreciated.
Cheating prevention
The ISM regulations on academic ethics, including cheating (see: ISM regulations) are fully applied in the course during
the entire semester
AUTUMN SEMESTER, 2016

Meeting

IN-CLASS HOURS
Lectures
Practice

TOPIC

Lecture #1
Course Introduction/Fiscal Policy/ Public debt

Externalities

READINGS

Ch. 4

Ch 5-6

Public Goods

Ch 7

Lecture #4
Cost-Benefit analysis

Ch. 8

Lecture #5
Role of government in Education

Ch. 11

Lecture #6
Role of government in Health and Pensions

Ch. 12, 14

Ch. 19

Optimal Taxation

Ch. 20

10

Lecture #10
Consumption Taxation

Ch. 25

11

Corporate Taxation

Ch. 24

12

Lecture #12
Tax Competition and Fiscal Federalism

Ch. 10

24

24

Lecture #2

5
6

7
8

Lecture #3

#7
Midterm (covers material from lectures 1-5)
Lecture #8
Tax Incidence
Lecture #9

Lecture #11

Total:

Assessment methods
TYPE
Debate Presentation

TOTAL HOURS

EVALUATION, %

30

20

Participation

10

Mid-term exam

30

30

Final Exam

52

40

Consultations

2
Total:

114

100

Debate Presentations
For the presentation topics each week I will assign a policy question. The two groups may think of themselves as
lobbyists trying to argue for or against the policy. During your presentation you will present arguments for your position,
which you must support with evidence and/or theory. This will be a competition, and the group which does a more
convincing job will always get a higher score. After your opponents have done their presentations, it would make sense
for you to ask them hard questions, as this will help you. Presentations will last approx. 10 minutes. If you go longer than
12 minutes you will be stopped.

AUTUMN SEMESTER, 2016

In addition, each group will present me with a one page summary of their arguments, including their evidence and
references. (look up "executive summary" as a guide). The work may be split up so that some members of the group
work on the summary and some do the presentation.
End-semester individual written final exam
The exam counts towards 40% of the final grade. It is a closed-book test which includes multiple choice questions and
open questions. It tests conceptual, analytical, and numerical skills. The exam will be based on all topics after the
midterm.
In case of a negative final grade, students are allowed a re-sit exam. It will cover all course material. The weight of a resit is 70%. Coursework cannot be rewritten but its evaluation (if positive) is not annulled.
Teaching methods
The course is taught in English and is structured as a combination of lectures, in-class activities, case studies, and
student debate presentations. It requires a substantial amount of preparation by the students and active involvement
during class.
Required Reading
1.

Gruber, Jonathan. Public finance and Public Policy. Macmillan, 2004.

Supplemental readings
1.
2.
3.
4.

Holcombe R. Public Sector Economics: The Role of Government in the American Economy. Englewood Cliffs,
NJ: Prentice Hall, 2006.
Stiglitz, J. Economics of the Public Sector (W.W. Norton 2000).
Barr, N. Economics of the Welfare state (Stanford university press 1998).
Harvey S. Rosen, Public Finance (McGraw-Hill, 2010, 9th edition or any other edition);

Role of the subject in reaching learning outcomes of Economics study program

Special learning outcomes
EKO. To describe the main economic theories and theoretical models, to adapt them to the theoretical and
practical issues (for example, demand and supply elasticity theory, economic cycles, classical economic
theory, Keynesianism, monetarism, rational expectations theory, cost-benefit analysis);
EKO. To explain the link between economic theory and practice, to apply that knowledge in assessing
statistical data and economic information on both micro- and macroeconomic level;
EKO. To explain and to analyze the role of government in financial politics, to model the impact of
governments fiscal and monetary policy decisions on countrys economy and social welfare;
EKO. To describe and to analyze economic, legal, political and social environment of companies and other
organizations; to identify and to evaluate internal and external changes and to make necessary decisions to
keep the firms or organizations economic and financial stability;
EKO. To forecast the influence of economic and financial decisions not only in a financial context, but also
in the wider context of business or organization management, to estimate the effect of economic and
financial decisions on the processes of a company or an organization, the motivation of companys human
resources, product and service quality, customer satisfaction, brand strength, corporate social
responsibility;
EKO. To select mathematical, statistical, econometric and other appropriate research methods and to
conduct individually a simple economic analysis of a country, a sector or a company (to collect, to organize
and to interpret the data).

Subjects
learning
outcomes
(CLO)
SLO 1,2,3,4

SLO 4,5,6

SLO 2,3,4,5

SLO 2,3,4,5

SLO 4,5,6

SLO 1,2,3,4

General learning outcomes

G1. To apply modern information technologies in the data gathering, analysis and communication;

SLO 2,3,4,5,6

G2. To apply a systematic, critical and constructive thinking in problem identification and solving;

SLO 2,3,4,5,6

G3. To be able to communicate well and express thoughts in writing and orally, both in English and native
language; to communicate with specialists and non-professional audiences;

SLO 1,2,5

AUTUMN SEMESTER, 2016

G4. To prepare research papers according to proper language, writing style and general bibliographic
citation requirements, in a creative and original way;

SLO 1,3

G5. To develop independent learning skills necessary to continue studies on a higher level;

SLO 1,2,3

G6. To communicate and to work effectively in an intercultural and interdisciplinary group or team.
G7. To know and to apply in practice certain aspects of various social sciences (history, geography,
sociology, logics, philosophy, arts, etc.), to supplement effectively the education of business or economics
by general knowledge.

SLO 1,3

Role of the subject in reaching learning outcomes of Finance study program

Special learning outcomes
S1. To describe the main economic theories and theoretical models, to adapt them to the theoretical and
practical issues (for example, demand and supply elasticity theory, economic cycles, classical economic
theory, Keynesianism, monetarism, rational expectations theory, cost-benefit analysis);
S2. To describe and to analyze economic, legal, political and social environment of companies and other
organizations; to identify and to evaluate internal and external changes and to make necessary decisions to
keep the firms or organizations economic and financial stability;
S3. To forecast the influence of economic and financial decisions not only in a financial context, but also in
the wider context of business or organization management, to estimate the effect of economic and financial
decisions on the processes of a company or an organization, the motivation of companys human
resources, product and service quality, customer satisfaction, brand strength, corporate social
responsibility;
S4. To select mathematical, statistical, econometric and other appropriate research methods and to conduct
individually a simple economic analysis of a country, a sector or a company (to collect, to organize and to
interpret the data);
S5. To be able to analyze a company or an organization as an integral unit, which strives for certain goals in
a market or social environment by effectively distributing their finite resources among objects and business
activities and obtains synergies from coordinated function planning, organization and management;
S6. To describe and to analyze financial management and financial decision making processes in
companies and other organizations, to solve problems of different levels of complexity in financial and
management accounting;

Subject
learning
outcomes
SLO 1-4

SLO 2-4

SLO 5-6

SLO 3-6

SLO 5-6

SLO 2-4

S7. To explain the corporate social responsibility and to be able to apply its principles in practice for a
company operating in a local as well as international markets;
S8. To select adequate research methods for the companys internal and external analysis and to conduct
individually simple research of internal and external environment (to collect, to organize and to interpret
data, based on them to make managerial decisions);
S9. To describe the basic financial theories and theoretical models, to adapt them to the theoretical and
practical issues (for example, time value of money, evaluation of investment projects, risk-return
relationship, investment portfolio theory, stock and other securities pricing models, capital costs, risk
management, exchange rates, financial intermediaries);
S10. To explain the link between financial theories and practice, to apply that knowledge in assessing the
financial information (such as efficient markets hypothesis, anomalies, capital structure);

SLO 1-4,5

SLO 1-4

S11. To describe and to analyze the financial management and financial decision-making processes in
business and other organizations;

SLO 2-4,6

S12. To describe the functions of financial markets and institutions, and to analyze their activities;

SLO 2

S13. To describe the main financial products and services, to assess their strengths and weaknesses from
both the customers and the suppliers perspective;
S14. To prepare, to analyse and to evaluate the financial part of investment projects and business plans.

SLO 2

General learning outcomes

G1. To apply modern information technologies in the data gathering, analysis and communication;

SLO 5-6

G2. To apply a systematic, critical and constructive thinking in problem identification and solving;

SLO 5-6

G3. To be able to communicate well and express thoughts in writing and orally, both in English and native
language; to communicate with specialists and non-professional audiences;
G4. To prepare research papers according to proper language, writing style and general bibliographic
citation requirements;

SLO 1-6

AUTUMN SEMESTER, 2016

G5. To develop independent learning skills necessary to continue studies on a higher level;

SLO 2-5

G6. To communicate and to work effectively in an intercultural and interdisciplinary group or team;

SLO 5-6

G7. To know and to apply in practice certain aspects of various social sciences (history, geography,
sociology, logics, philosophy, arts, etc.), to supplement effectively the education of business or economics
by general knowledge.

SLO 4-5

AUTUMN SEMESTER, 2016