ECONOMICS OF THE PUBLIC SECTOR
The objective of the theory of public finance is to determine the optimal scales of government interventions or expenditures in different areas and the optimum modes of financing these expenditures. The problems that the government handles are extremely complex and this makes the theory of public finance challenging and exciting at the same time. It is continuously searching for better, more acceptable and easier-to-implement solutions to the problems encountered. To help the readers get a clear idea about this fascinating field of study, this book builds up in detail the major theories of public finance starting from the first principles and explains how government decisions are taken on the basis of the guidelines yielded by these theories. This book exposes the students to various facets of public finance which develops analytical frameworks to: Address the issues of efficient allocation of resources between private, public and mixed goods Ensure equitable distribution of tax burden among individuals Find ways of minimizing inefficiency of the tax structure Study the statutory and economic incidence of different types of taxes Examine the implications of government borrowing Develop the rationale of distributing economic or fiscal responsibilities and tax powers among different tiers of government. The book makes the comprehension of the subject easier by developing simple mathematical models to derive the major results in each of the above areas, and by explaining the economic intuition of the results in detail. The concepts are illustrated with the help of simple examples from the Indian economy. Moreover, the book assesses India’s economic policies in the light of the theories discussed. This drives home the relevance of the subject and makes the theories meaningful to the students. Another distinguishing feature of the book is that it contains a large number of review questions and numerical problems on every topic discussed to help the students apply the tools and techniques learnt and thereby develop a sound understanding of the subject. This textbook is designed to serve the needs of undergraduate and postgraduate students of economics for a course in Public Finance/Public Economics.
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ability to pay amount of tax benefit principle borrowing budget line buyers capital gains commodity consumers consumption corporation income tax corresponding cost deadweight loss demand price denoted derive distribution economic equal excess burden expenditure factor finance firm fiscal deficit Following the imposition free rider problem government's Hence horizontal equity imposed income effect increase India indifference curve individual individual's interest rate investment project labour Let us explain loans lower government lump sum tax marginal social marginal utility matching grant non-excludable non-rival optimum point output partial equilibrium present value problem produced production possibility frontier profit maximizing proportional income tax proportional tax public debt Ricardian equivalence rise risky asset sales tax sector selective indirect tax service tax slope substitution effect supply price Suppose tax burden tax incidence tax liability tax rate tax revenue tax structure taxable income taxation transfers unconditional grant unit tax vertical