Generic Elective (GE-7): Theory of Public Finance
Semester
Duration (per week)
Course title Eligibility
Credits Prerequisite
& Code Practical/ Criteria
Lecture Tutorial
Practice
III/V/VII
Theory of
Introductory
Public Class 12th
4 3 1 0 /Principles of
Finance – Pass
Microecono
ECON061
mics
Learning Objectives
The Learning Objectives of this course are as follows:
• This course will look into the efficiency and equity aspect of market mechanism of allocating
resources and also the design and implications of public sector policies including taxation and
monetary policies.
• It will deal with efficiency, equity, public goods, externalities, taxation, subsidies, fiscal multiplier,
money supply, interest rate and their interlinkages.
Learning outcomes
The Learning Outcomes of this course are as follows:
• This course aims to develop the broad conceptual frameworks which will enable students to learn
economic issues efficiency, equity, public goods, externalities, taxation, subsidies, fiscal multiplier,
money supply, interest rate and their interlinkages.
• It will also allow them to critically evaluate various micro and macro aspects of government policies
and their effects on output, distribution, and welfare in the economy.
• The course will be useful for students aiming towards careers in the government sector, policy
analysis, business and journalism.
Syllabus
UNIT I: Theories of Public Sector and Market Mechanism (12 hours)
Overview of Fiscal Functions; Tools of Normative Analysis; Pareto Efficiency; General Equilibrium
Framework; Equity and the Social Welfare
UNIT II: Market Failure (12 hours)
Sources of Market failures; Public Goods; and Externalities.
UNIT III: Theories of Taxation (12 hours)
Product and Factor tax; Tax Burden; Tax Distortions; Tax Design
UNIT IV: Working of Fiscal and Monetary Policies (9 hours)
Fiscal policy; Banking system and creation of Money; Monetary Instruments and Policies; Fiscal and
Monetary Management in Indian Context.
Recommended readings
• R.A. Musgrave and P.B. Musgrave ,Public Finance in Theory and Practice, 5th Edition.
• Rosen,H.&Gayer,T.(2014).Publicfinance(10thed.).NewYork:McGraw-Hill.
• Stiglitz, J E & Rosengard J K (2015), Economics of the Public Sector, 4th ed, W.W. Norton.
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• Jonathan Gruber, (2011), Public Finance and Public Policy, 3rd edition, Worth Publishers.
(MainTextbook)
• Cullis, J., Jones, P. (1998). Public finance and public choice, 2nd ed. Oxford UniversityPress.
• Hindriks,J.,Myles,G.(2013).Intermediatepubliceconomics,2nded.MITPress.
• A. Bagchi (ed.): Readings in public finance. Oxford UniversityPress.
• Stiglitz, J. (2009). Economics of the public sector, 3rd ed. W. W.Norton.
Note: Examination scheme and mode shall be as prescribed by the Examination Branch, University
of Delhi, from time to time.
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