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Public Finance

Public Sector Economics / Public Finance Syllabus for M.A. Economics

Public Sector Economics / Public Finance (Paper – 6.2) M.A. Economics Part-II

This course aims at introducing students to the theoretical and quantitative aspects of various Public Economics theories. This is achieved by providing the students with an understanding of Public Finance theory and models.

Topic 1: Introduction and Role of the Public Sector:

  • The Economic Functions and Public Goods
  • Allocation of Resources
  • Redistribution of Income and Wealth and Stabilization
  • Pricing of Public Goods.

Topic 2: The Theory of Public Goods

  • Fiscal Principles and Concepts
  •  The Traditional Principle of Tax Neutrality is the Expended Principle of Fiscal Neutrality
  • Exhaustive Vs. Non-Exhaustive Public Expenditures
  •  Income Elasticity of Government Expenditures
  • Tax Vs. Non-tax Revenues
  • Microeconomic Vs. Macroeconomic Regulatory Taxes
  • Tax Base
  • Tax Rate Relationship
  • Progressive, Regressive and Proportional Taxes
  • Marginal Propensity to Tax and Marginal Vs. Average Tax Rates
  • Income Elasticity of a Tax Integral Fiscal Non-Neutrality.
  • Tax Efforts and Tax Collection Performance in Pakistan.

Topic 3: Public Revenue and Taxes

  • The Economic Case for the Public Sector to Allocate Resources:
  • Market Imperfections,
  • Decreasing Costs of Production
  • Public Goods and Externalities
  • Pricing Decreasing Cost Industry.

Topic 4: The Theory of Public Goods

  • Public and Private Goods
  • Pure Public Goods
  • Should Public Sector be Produced Vs. Private Goods?
  • Semi-Public Goods
  • Merit Goods
  • Free Rider Problem
  • Externalities and Public Policy.

Topic 5: Distributional Equity in Taxation

  • The Ability to pay and Economic benefits (received)
  • Cannons of Taxation
  • The Optional Income Tax Approach
  • Optimum Tax and Revenue Collection

Topic 6: Tax Structure of Pakistan

  • Various Kinds of Taxes and their Objectives / Performance in Pakistan.
  • Income and Sales Taxes
  • Excise and Custom Duties
  • Export and Import Taxes
  • Tax Reforms in Pakistan and their Impacts.

Topic 7: Tax Shifting and Incidence

  • General Equilibrium Vs. Partial Equilibrium: Tax Incidence Analysis.
  • Determinants of Tax Shifting under Partial Equilibrium Conditions.
  • Impacts of Tax Shifting on Price.

Topic 8: Fiscal Policy: Public Expenditure and Budget

  • Theories of Public Expenditures, Wagner’s Law, Efforts of Public Expenditures.
  • Components of Public Expenditures in Pakistan
  • Sources and Direction of the Growth of Public Expenditures.
  • Kinds of Budget, Surplus, Deficit and Balanced
  • Preparation of Budget Cycle in Pakistan
  • Development and Non-Development Budget and its Patterns
  • Zero Based Budget, Planning, Programming Budgeting System.

Topic 9: Inter-Government Fiscal Relations

  • Fiscal and Economic Aspects of Federalism
  • Federal-Provincial Fiscal Coordination
  • Collection of Revenue and Provincial Share and its Distribution Criteria.
  • Deficit Financing and its Impacts.

Topic 10: Development Finance

  • Fiscal Policy in a Developing Economy
  • Tax Structure of LDCs
  • Role of Deficit Financing
  • Fiscal Policy in Pakistan and its Impacts.

Topic 11: Public Debt

  • Need and Burden of Public Debt: Domestic and Foreign.
  • Debt Modelling and Forecasting Debt Needs.
  • Optional Debt. Debt Modelling and Offer Curve
  • Problem of Debt Servicing
  • Structure of Public Debt in Pakistan: Internal and External Debt Problem of Pakistan.
  • Ricardian View of Public Debt.

Recommended Books:

  1. Bernard P. Herber, (1999), Modern Public Finance.
  2. Chellieah R.J. (Latest eds.), Fiscal Policy in Less Developed countries.
  3. David N. Hyman, (1996), Public Finance, A Contemporary Application of —. Harcount Brace College Publishers.
  4. Govt. of Pakistan, Economic Survey, Yearly Publication, Ministry of Finance, Economic Advisory Wing, Islamabad.
  5. Rosen and Harvey S., (1999), Public Finance, McGraw Hill.
  6. Musgrave R.A. and B.P., Musgrave (Latest Eds.), Public Finance in Theory and Practice, McGraw Hill.
  7. Stiglitz E., (2000), Economics of The Public Sector, W. W. Norton & Co.


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