Education business

KENYATTA UNIVERSITY

UNIT CODE & NAME:
EAE 313 - PUBLIC FINANCE




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,COURSE CONTENT

Lecture One: Introduction and the nature of public finance
 Definition of public finance
 The scope of government activities
 The needs for public sector
 Reasons why government should participate in economic activities
 Models of efficient allocation and Measuring the size of public sector
 The size of the public sector
 The principles of maximum social benefits

Lecture Two: Public policy objectives
 Introduction
 Public sector objectives (the allocation function; public provision of
social goods; the distribution function; fiscal instruments of
distribution policy; the stabilization function)
 Instruments of stabilization policy
 Coordination and conflict of interest.

Lecture Three: Public goods
 Properties of public goods
 Difference between public goods and private goods
 Comparison between efficient provision of public and private goods

Lecture Four: Market failure and the rationale for government intervention
 Sources of market failure (Imperfect markets; costly information;
externality as a cause of market failure)
 Implications of externalities for allocation efficiency
 Solutions to externalities

Lecture Five: Public expenditure
 Definition of public expenditure
 Canons public expenditure
 Reasons for the growth of public expenditure
 Restraints to the growth of public expenditure
 Consequences of the growth of public expenditure
 Effect of public expenditure
 Public expenditure and economic stability in advanced economies
 Theoretical aspects to public expenditure evaluation
 Types of public projects; types of benefits and costs; shadow pricing
and market item; decisions involving long-term projects; choice of
discount rate; capital budgeting techniques

Lecture Six: Budget
 Canons of budgeting
 Types of budget
 Incremental budgeting
 Zero base budgeting
 Performance and programming budgeting system

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,Lecture Seven: Taxation as a source of revenue
 Canons of good tax system
 Approaches to equity
-Benefit principle
-Ability to pay as basis for taxation
 Categories of taxes
 Shifting and incidence of tax
 Magnitude of tax burden
 Types of tax incidences
 Effects of tax incidence on market for goods
 Other factors that affect effective incidence of tax

Lecture Eight: Alternative sources of public revenue
 Theory of Public debts
 Classification of public debt
 Why is public debt incurred
 Sources of public borrowing
 Economic effect of public borrowing
 Effects of public debt
 Burden of internal and external debt
 Redemption of public debt
 Public borrowing requirement
 Government induced inflation

Lecture Nine: Privatization
 Mechanism of privatization
 Case for privatization
 Case against privatization.




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, NATURE OF PUBLIC FINANCE
LECTURE ONE
1.1 INTRODUCTION




The chapter introduces to the student the scope of government activity, measures of public
sector and the needs for public sector. Governments provide many goods and services to
public. In Kenya the government provides subsidized education in primary, secondary and in
university. Also provided are health cares and environmental protection. The government is
involved in projects that directly increase the production of goods and services. It provides
water for industrial use, domestic use. Such projects involve expenditures of large amount of
money provided through taxing, licensing and borrowing.


The study of public funding enables us to know how the government through its budgetary,


1.2 LECTURE OBJECTIVE




At the end of this lecture you should be able to:
(i) Define public finance
(ii) Discuss the scope of government activities
(iii) Explain the measures of public sector
(iv) Discuss the needs of public sector



Definition of public finance
Public finance (government finance) is the field of economics that deals with budgeting, the
revenues and expenditure of a public sector entity, usually government.




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