Modern Public Economics

Author: Rambendra Jha
Publisher:
Publish Date: 2004-01-01
Features: Public economics is an important research field in modern economic theory. It has a long academic tradition and is continuously enriched and deepened by integrating new developments from related disciplines such as political science. This book comprehensively and thoroughly presents the latest research findings in the field. It provides an authoritative pathway for policymakers, researchers in economic theory, government departments, and managers of relevant enterprises to understand the core knowledge of public economics. Building on public economics, the book extensively introduces the theoretical system and several cutting-edge issues of the field. It is well-structured, rich in content, and closely aligned with the latest developments. The author delves into some important and controversial topics, offering complete mathematical proofs and derivations. The book is organized as follows.
Part "Welfare Economics" consists of three chapters.
Chapter 1 discusses the fundamental concepts of consumer demand theory. These concepts will be frequently used in public economics. The chapter covers topics including direct and indirect utility functions, expenditure functions, compensation, Roy's identity, and the Slutsky equation. The chapter is self-contained, and students do not need to refer to microeconomics textbooks to understand these functions.
Chapter 2 highlights the distinction between reaching the Pareto frontier and selecting a point on it. The chapter discusses the efficiency issues of achieving Pareto optimality under ideal conditions. The problem of choosing a point on the Pareto frontier is addressed in Chapter 3. This section also discusses the issue of democratic aggregation of preferences. The Arrow Impossibility Theorem, Gibbard's theorem on oligarchy, and Sen's Impossibility Theorem all emphasize the obstacles to democratic aggregation of preferences. In response, we examine Arrow's analytical framework, which shows that these outcomes may arise if we accept interpersonal comparability of utility. Since the concept of welfare is widely used in practice and theory, this chapter also explains utilitarianism, new utilitarianism, Rawlsianism, and Atkinson's standards for social welfare.
Part "Public Expenditure Theory" consists of three chapters.
Chapter 4 explores a fundamental principle of public expenditure, namely the existence of externalities. Solutions to various externalities are also discussed and evaluated in this chapter.
Chapter 5 can be considered a standalone section, primarily focusing on pure public goods. It derives various forms of Samuelson's conditions for the Pareto optimal provision of pure public goods. The "free-rider problem" and its solutions are also discussed in this chapter. The chapter also includes a brief discussion of a public goods voting model.
Chapter 6 addresses some interesting issues in public goods theory. We examine club theory and the "crowding-out effect," which refers to financing public goods through distorted tax systems and asymmetric information.
Part "Tax Theory" consists of ten chapters.
Chapters 7, 8, 9, and 10 discuss tax incentives. Chapters 7, 8, and 9, respectively, examine the effects of taxes on savings, labor supply, and investment. Chapter 10 focuses on the relationship between the tax system and risk-taking.
Chapter 11 studies the static tax incidence problem, discussing a two-sector static general equilibrium model of tax incidence. It then analyzes the incidence problem in the presence of involuntary unemployment and regulation.
Chapter 12 studies the dynamic model of tax incidence, building on the basic Solow model and the Diamond life-cycle model. It discusses the concept of balanced growth paths in tax incidence, the incidence of taxes in the Blanchard-Yan life-cycle model, and issues related to government financing through taxes and public debt, as well as the "Ricardian equivalence" proposition. It also examines the incidence of taxes in a money growth model.
Chapter 13 discusses commodity taxes. We test the standard elasticity formula and the limits of using commodity taxes for redistribution.
Chapter 14 discusses optimal linear and nonlinear income tax systems.
Chapter 15 studies four main issues in income tax theory: optimal tax systems in endogenous growth models, indexation of income taxes in inflation, time-inconsistency issues, and simple models of taxation.
Chapter 16 discusses issues related to tax reform.
Part "Applications of Public Economics" consists of three chapters.
Chapter 17 provides a detailed analysis of pricing in the public sector, covering marginal cost pricing, efficient redistribution second-best pricing, nonlinear pricing, and joint product pricing.
Chapter 18 discusses international tax issues.
Chapter 19 offers a brief summary of cost-benefit analysis.
Part "Fiscal Federalism" consists of two chapters.
Chapter 20 discusses key issues in federal economies, such as the optimal degree of decentralization.
Chapter 21 discusses the allocation of subsidies and taxes within the framework of federal operations.
The references at the end of the book are provided for further in-depth study and reference.