MPA 506: Public Sector Economics (core)

This module seeks to provide students with a firm foundation in the logic and practice of systematic research inquiry in Public Administration and Management. The module will emphasize the importance of research design and measurement, with students introduced to the basics of qualitative, quantitative and mixed research methodologies.

Aim of the Course

The aim of this course is to provide an understanding of government activity through an economic lens. Thus public sector economics focuses on the role of government and the different ways in which government policies affect the economy. This, in turn, helps to develop an analytical framework that facilitates the evaluation of public policy and subsequently informs public debate particularly in terms of how the government makes and what decisions it should make. Government activities will be analyzed both with regard to the government’s actual activities and from the standpoint of what government can and should do using both positive and normative analysis.

Learning Outcomes

At the end of the course, students should be able to:

  • Grasp the major themes or issues in public sector economics.
  • Explain why the state produces and/or allocates some goods but leaves others to the market.
  • Develop the skills appropriate to an economic analysis of the role and effects of government intervention in market economies.
  • Develop an understanding of the link between theory and policy to appreciate the arguments both supporting and questioning developments in the public sector.
  • Develop and understanding of analysis used to evaluate issues pertaining to the public sector.

Course Topics

  1. Introduction
  • Meaning and scope
  • Key concepts
  • Normative and positive analysis
  1. Theories of the public sector
  • Wagner’s law
  • Political model
  • Baumol’s model
  • Monopoly and market capture
  1. Economic  Systems and Governance
  • Economic systems
  • Fiscal policy
  • Monetary policy and interest rates
  • Economic  policies
  • Economic governance
  • Malawian economic systems and governance
  1. The balance of payments
  • International trade
  • Imports and exports
  • Foreign exchange reserves
  • Foreign debt
  • Factors influencing Exchange  Rate
  1. Economic rationale for state intervention
  • First and second fundamental theorems of welfare economics
  • Assumptions under which markets are efficient
  • Types of interventions and interventions for social justice
  • The nature and magnitude of public sector interventions
  • Government  failure
  1. Public goods and preference revelation
  • Characteristics of public goods
  • Demand and supply of public goods
  • Optimal provision of public goods
  • Non-excludability and preference revelation
  • Preference revelation and the tax system
  • Critique of mechanisms to induce true preference
  1. The welfare state with particular focus on health and education
  • Efficiency and equity arguments for government intervention
  • Conception of equity and compatibility of equity definitions
  • Information problems and measuring costs
  • Collective goods and game theory
  1. Public choice
  • Majority voting
  • Median voter models and oversupply of public goods
  • Paradox of voting
  • Majority voting and costs
  • Arrow’s impossibility theorem
  1. Government Spending and Taxation
  • Government spending
  • Introduction to the tax system
  • Incidence of taxes in competitive and non-competitive market structures
  • Effects of taxes on economic behavior and welfare of consumers and producers
  • Responses of labour supply to taxation
  • Taxation systems in Malawi
  1.   Decentralized government
  • Appropriate functions for decentralized structures
  • Optimum size of local authorities
  • The national fiscal architecture
  • Fiscal transfers and the equity trade off
  • Intergovernmental grants
  1. Public Sector Economics in Malawi
  • The politics of economic policy making   in Malawi
  • Malawian economy: past, present and future

Main Texts

Stiglitz, J., (2000) Economics of the Public Sector (3rd Edition): W.W Norton and Company

Barr, N., (2012) The Economics of Welfare State (5th Edition): Oxford University Press

Tresch, R., (2008) Public Sector Economics: Palgrave Mac Millan, New York

Recommended Texts

Connolly, S., and Munro, A., (1999) Economics of Public Sector: Prentice Hall, Europe

Le Grand, J., Propper, C., and Smith, S., (2008) The Economics of Social Problems (4th Edition): Palgrave MacMillan, London

Bailey, S., (1995) Public Sector Economics: Theory, Policy and Practice: MacMillan, London

Barnett, R., (1993) Current Issues in Public Sector Economics: MacMillan, London

Journal Publications

Coase, R., (1960) “The Problem of Social Cost”, Journal of Law and Economics, Vol. 3, No, 1 pp 1-44

Hardin, G., (1968) “The Tragedy of the Commons”, Science, Vol. 162, No. 3859 pp 1243-1248

Grout, P., and Stevens, M., (2003) “The Assessment: Financing and Managing Public Services”, Oxford Review of Economic Policy, Vol. 19, No. 2 pp 215-234

Barr, N., (2004) “Higher Education Funding”, Oxford Review of Economic Policy, Vol. 20, No.2 pp 264-283

Published Apr. 17, 2015 4:40 PM - Last modified Oct. 28, 2020 11:22 AM
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