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PED-210: Public Finance in Theory and Practice

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Harvard Kennedy School

PED-210: Public Finance in Theory and Practice

Description: Examines policy options, with their strategic trade-offs and operational implications, for the design and implementation of public finance in both high-income countries and developing/transitional economies. Covers the role and size of the public sector, including the rationale for public sector interventions such as market failure and distributional concerns; public resource mobilization via direct and indirect taxation, including the economics of taxation, taxation of income, wealth and consumption, tax incentives, tax compliance and enforcement, and tax reform, as well as user charges and fees; public expenditure policy, including assessment of government social protection programs and public sector efficiency and effectiveness; balanced budgets, deficit financing, debt management, fiscal consolidation, and fiscal sustainability in the context of the global economic crisis and the debate over fiscal stimulus vs. fiscal austerity policies; and fiscal decentralization and intergovernmental fiscal relations. Emphasizes utilization of theoretical and applied techniques in a comparative context for evaluation of the impact of alternative resource mobilization and expenditure policies on allocative efficiency, social equity, and macroeconomic stability. Heavy use of case studies. No economics course prerequisites. 

FacultyJay Rosengard

Source: At (accessed 20 January 2014)


Teaching Topics Addressed in this Course, Organized by Public Management Subject



Additional Course Description in Syllabus

Course Objective: Public finance issues are central to economic and political discourse worldwide, as one of the primary functions of government is to generate resources from its people to spend money improving the lives of its people. However, while the concept of "money from the people, for the people" is quite simple conceptually, there is little agreement on how best to raise and spend public funds in practice. Thus, the primary course objective is to provide students with the tools, and the skills to use these tools, to understand the underlying concepts and practical tradeoffs entailed in public finance policy alternatives. This will prepare students to be informed consumers of public finance data, and thus, equip students to engage constructively in the formulation, implementation, and evaluation of public finance policies.

Course Audience: The course is intended for three main audiences:

  • Practitioners, consisting of central, state/provincial, and local/municipal government officials dealing with public finance and fiscal policy, private sector providers of public infrastructure and services, and community-based development groups.
  • Academic community, consisting of students who would like to enter the field of public finance, as well as scholars and faculty doing research and teaching in this field.
  • Citizens, consisting of members of the general public interested in understanding and influencing their country’s budget and tax policies.

Reference Materials

Richard A. and Peggy B. Musgrave, Public Finance in Theory and Practice, Fifth Edition (New York: McGraw Hill, 1989).

Joseph E. Stiglitz, Economics of the Public Sector, Third Edition (New York: W.W. Norton & Co., 2000).

Harvey S. Rosen and Ted Gayer, Public Finance, Eighth Edition (New York: McGraw-Hill/Irwin, 2007).

Jonathan Gruber, Public Finance and Public Policy, Second Edition (New York: Worth Publishers, 2007).

Karl E. Case, Economics and Tax Policy (Boston: Oelgeschlager, Gunn & Hain, 1986).

C. Eugene Steuerle, Contemporary U.S. Tax Policy (Washington, D.C.: The Urban Institute Press, 2004).

Richard Goode, Government Finance in Developing Countries (Washington, D.C.: The Brookings Institution, 1984).

A.R. Prest, Public Finance in Developing Countries, Third Edition (New York: St. Martin’s Press, 1985).

Sanjeev Gupta, Benedict Clements, and Gabriela Inchauste, eds., Helping Countries Develop: The Role of Fiscal Policy (Washington, D.C.: International Monetary Fund, 2004).

Stephen Lewis, Jr., Taxation for Development: Principles and Applications (New York: Oxford University Press, 1984).

R. Bird and O. Oldman, eds., Taxation in Developing Countries, Fourth Edition (Baltimore: Johns Hopkins University Press, 1990).

David Newbery and Nicholas Stern, eds., The Theory of Taxation for Developing Countries (New York: Oxford University Press for the World Bank, 1987).

Parthasarathi Shome, ed., Tax Policy Handbook (Washington, D.C.: International Monetary Fund, 1995).

Joseph J. Cordes, Robert D. Ebel, and Jane G. Gravelle, eds., The Encyclopedia of Taxation and Tax Policy, Second Edition (Washington, D.C.: The Urban Institute Press and the National Tax Association, 2005).

Ronald C. Fisher, State and Local Public Finance, Third Edition (South-Western College Pub, 2006).    

Commentary by the Atlas editors: The class titles and course outline provide candidates for topic titles to be developed by the Atlas:

I. The Role and Size of the Public Sector

A. Economic Rationale for Public Sector Interventions: Market Efficiency and Market Failure, Distributional Concerns

B. The Nature and Magnitude of Public Sector Interventions: Defining the Responsibilities and Measuring the Size of the Public Sector

C. Understanding a Nation’s Fiscal Architecture: Building Appropriate Revenue and Expenditure Systems

II. Public Expenditure Policy

A. Government Deficits, Government Debt, and Fiscal Consolidation

B. Public Sector Production and Provision, Government Failure, and Private Sector Participation/Public-Private Partnerships in Production and Provision (PSP/PPP)

C. Government Social Protection Policies

D. Megaprojects

E. Assessment of Public Sector Expenditure Efficiency and Effectiveness

III. Public Resource Mobilization

A. Economics of Taxation

B. Taxation of Income and Wealth

C. Taxation of Consumption

D. Taxation and the Environment, Taxation and Natural Resources

E. Tax Incentives, Compliance, and Enforcement

F. Tax Reform

G. User Charges

V. Intergovernmental Fiscal Relations and Local Government Finance

A. Fiscal Federalism and Fiscal Decentralization

B. Resource Transfers

C. Local Government Debt Financing

Page created by: Ian Clark, 20 January 2014. The content presented on this page, except in the Commentary, is drawn directly from the source(s) cited above, and consists of direct quotations or close paraphrases.




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© University of Toronto 2008
School of Public Policy and Governance