Module I: The Case for Public Sector
The role of government in the national economy-Concepts of club goods, public goods-
Tiebout hypothesis, merit goods, externalities, Pigovian tax.
Module II: Public Revenue and Policy
Theory of tax- Partial and general equilibrium analysis- Shifting and incidence of tax- Theory
of optimal taxation- Distributional considerations in public finance- Fiscal and monetary
policies -Comparative analysis- Balanced budget multiplier- Zero based budgeting.
Module III: Public Expenditure and Debt
Pure theory of public expenditure-Pricing of public utilities-Public choice theory-The Median
Voter theorem- Concept of subsidy-Macroeconomic impacts of deficits- Debt burden and
inter-generational equity- Sustainability of public debt and Domar stability condition.
Module IV: Fiscal Federalism
Theory of fiscal federalism- Theory of inter-governmental transfers- fiscal decentralisation-
Problems of centre-state financial relations in India-Vertical and horizontal imbalance in
inter-governmental transfers in India.
Module V: Indian Public Finance
Trend and sources of revenue in the union, states and local bodies in India-Trends in public
expenditure and public debt in India- VAT and GST in federal set-up- The FRBM Act-
Federalism and issues of Centrally Sponsored Schemes- Finance Commissions and the
changing centre- state relations during the reform period-Analysis of the latest union budget.
- Teacher: SERENE THOMAS
Module I: Intertemporal Choice and Capital Decisions
Capital and the rate of return- Determining the rate of return- Demand for future goods-
Utility maximisation- Effects of changes in r- Supply of future goods- Equilibrium price of
future goods- Rate of return- Real interest rates and nominal interest rates- Pricing of risky
assets- The firm’s demand for capital- The net present value criterion for capital investment
decisions- Adjustment for risks- Diversification versus non-diversifiable risks- The capital
assets pricing model.
Module II: General Equilibrium and Welfare Economics
Elements of general equilibrium analysis-General equilibrium of exchange- General
equilibrium of production- Efficiency of competitive markets- Welfare economics- Criteria of
social welfare-Pareto optimality-Kaldor-Hicks compensation criterion- Scitovsky criterion-
Deriving a Social welfare function- Theory of second best- Arrow’s impossibility theorem-
Rawls theory of justice- First Theorem of welfare economics- Second Theorem of welfare
economics.
Module III: Externalities and Public Goods
Externalities-Negative externalities in consumption and production-Positive externalities in
consumption and production-Externalities and inefficiency-Ways of correcting market
failure- Externalities and property rights-Coase theorem- Common property resources-
Tragedy of commons-Public goods-Characteristics- Public goods and market failure-
Provision of public goods- Free rider problem- Lindahl pricing.
Module IV: Asymmetric information
Asymmetric information- Implications of asymmetric information- The lemons problem-
Adverse selection- Hidden information- Moral hazard (hidden action)- Insurance markets-
Market signalling- Principal-agent problem- The efficiency wage theory.
Module V: Behavioural Economics
Behavioural economics- Reference points and consumer preferences- Rules of thumb and
biases in decision making.
- Teacher: SERENE THOMAS