Course Catalogue

Module Title: Public Finance

Module code: ECF302

Programme: BA Economics + BA (Hon) Economics

Credit Value: 12

Module Tutor: Dr. Anil Dogra

General Objectives:

This module aims to provide theoretical knowledge about the significance of public finance and make students conversant with different tools of budgetary policy with reference to Bhutanese Economy. The skill about different kinds of Public Expenditure, different resources and instruments to raise and mobilize funds to finance the public expenditure and the ability of the students to critically evaluate the current policy issues will also be nurtured.

Learning Outcomes:

On the completion of this module students should be able to:

· Discuss the issues pertaining to public sector economics

· Critically evaluate the government expenditure & revenue and be able to actively participate in the relevant debate and discussions.

· Demonstrate an understanding of the basic economic concepts used in the study of public economics.

· Apply appropriate economic tools to analyse government behavior and impact

· Construct and present logical economic arguments in the evaluation of current issues in public sector economics.

· Explain public financing in Bhutan

Learning and teaching approach

Lectures/ Guest speakers (60 hours)

Tutorials (15 hours)

Seminars (25 hours)

Group Discussions / Debates (20 hours)

Assessment

Semester end examination (50%)

Assignments (10%)

Term paper (25%)

Term Paper presentation in seminars (15%)

Subject matter

1. Fiscal functions (5hours)

Allocation, Distribution and Stabilization Functions. Coordination or Conflict of Functions, Interaction of public and private sectors.

2. Theory of Public Goods (10hours)

Market Failure to make provision social goods: Technique and method for the Provision of Social Goods. Efficient Allocation Models for making provision of social and private goods. Explanation of Mixed and Merit Goods. Voting Rules and Fiscal Policy.

3. Revenue (tax and non-tax revenues) (10hours)

Classification and principles of taxation. Effects of taxes on behavior and Measurement of welfare. Tax Incidence in Partial and General Equilibrium; Welfare Implications of tax incidence on the welfare aspects of the society. Efficiency and Equity considerations. Non-tax revenue resources: fees, fines, royalty, public sector profits, dividends of the govt.

4. Public Debt (5 Hours)

Sources Public borrowing, causes and cost of borrowing and its impact on the welfare and development of the country

5. Public Expenditure (5 Hours)

Theories of Public Expenditure (Peacock- Wiseman and Wagner). Expenditure estimates

6. Public pricing (5 Hours)

Public Sale of Private Goods. Marginal Cost Pricing, Peak Load Pricing, Pricing of social facilities, Taxes v/s regulations, Property Rights, Internalizing the externalities.

7. Structure of Public Finance in Bhutan (20 Hours)

Govt. budgeting:Types and classification of Budget, Budgetary deficits, Rate and Pattern of Growth of Public Expenditure. Tax and non-tax Revenue in Bhutan. Trends in Government Revenue and Expenditure, Budgetary deficit and Public Debt in Bhutan.

Reading list

Essential Reading:

1. Musgrave, R. A., & Musgrave, P. B. (2004). Public finance in theory and practice. New Delhi: Tata McGraw-Hill.

2. World Bank (1996). Bhutan country economic memorandum, report no. 16113-BHU.

3. RGOB (different years). Selected Economic Indicators, Royal Monetary Authority.

4. RGOB (different years); Annual Budget Report, Ministry of Finance.

5. World Bank (Annual Publication). World Development Indicator. World Bank.