Unit 2642: Public Sector Economics

1. Introduction to Public Sector Economics

1.1 Role of the Public Sector in the Economy

• Definition and scope of the public sector
• Comparison with private sector

1.2 Rationale for Government Intervention

• Market failures and government objectives
• Equity, efficiency, and redistribution

1.3 Types of Government Goods and Services

• Public goods, merit goods, and private goods
• Regulatory and redistributive functions

1.4 Scope of Public Sector Activities

• Provision of goods and services
• Regulation and redistribution

2. Public Goods and Externalities

2.1 Characteristics of Public Goods

• Non-excludability
• Non-rivalry

2.2 Free Rider Problem

• Definition and implications
• Challenges in provision

2.3 Methods for Providing Public Goods

• Direct government provision
• Contracting out and subsidies

2.4 Externalities

• Positive externalities (e.g., education, vaccination)
• Negative externalities (e.g., pollution, congestion)

2.5 Government Interventions to Address Externalities

• Taxes and subsidies
• Regulation and standards
• Tradable permits and market-based solutions

3. Taxation and Government Revenue

3.1 Types of Taxes

• Income tax
• Sales tax / Value-added tax (VAT)
• Property tax
• Corporate tax

3.2 Tax Incidence

• Who bears the tax burden?
• Shifting and sharing of taxes

3.3 Tax Efficiency and Equity

• Efficiency losses (deadweight loss)
• Horizontal and vertical equity
• Progressive, regressive, and proportional taxes

3.4 Sources of Government Revenue

• Taxes
• Non-tax revenues (fees, fines, state-owned enterprises)

4. Government Expenditure and Budgeting

4.1 Types of Government Expenditures

• Mandatory spending (e.g., entitlement programs)
• Discretionary spending
• Transfer payments

4.2 Budgeting Process

• Preparation, approval, and execution
• Role of fiscal institutions

4.3 Fiscal Policy

• Objectives (stabilization, growth, redistribution)
• Expansionary vs contractionary policy

4.4 Public Debt Management

• Causes and consequences of public debt
• Debt sustainability and management strategies

5. Social Welfare Programs

5.1 Overview of Social Welfare Programs

• Social security
• Unemployment insurance
• Healthcare programs
• Education subsidies

5.2 Impact on Income Distribution

• Poverty alleviation
• Reducing income inequality

5.3 Economic Stability and Welfare

• Automatic stabilizers
• Social safety nets

6. Public Choice Theory

6.1 Introduction to Public Choice Theory

• Definition and origins
• Comparison with traditional economic theory

6.2 Behavior of Voters, Politicians, and Bureaucrats

• Rational choice and self-interest
• Collective decision-making challenges

6.3 Implications for Public Policy

• Government failure
• Rent-seeking and lobbying
• Policy outcomes and inefficiencies

7. Market Failures and Government Intervention

7.1 Types of Market Failures

• Monopoly and market power
• Asymmetric information
• Externalities and public goods (review)

7.2 Reasons for Government Intervention

• Correcting inefficiencies
• Promoting equity

7.3 Policy Tools to Correct Market Failures

• Regulation
• Taxes and subsidies
• Provision of public goods
• Antitrust policies

7.4 Effectiveness and Limitations

• Government failure risks
• Balancing costs and benefits

8. Public-Private Partnerships (PPPs)

8.1 Concept and Definition

• What are PPPs?
• Types of PPP arrangements

8.2 Rationale for Collaboration

• Leveraging private sector efficiency
• Resource mobilization

8.3 Benefits of PPPs

• Improved service delivery
• Risk sharing
• Innovation and investment

8.4 Challenges and Risks

• Contractual complexities
• Accountability and transparency
• Political and financial risks