Public Sector Economics

Main topics of study:

PART A: Market Failure

Economic Rationales for the State

  • Competitive Equilibrium
  • Efficiency
  • Pareto Principle
  • Interpretations
  • Further Rationales

Equity and Efficiency

  • Equality and Efficiency
  • Social Choice
  • Social Welfare Functions
  • Consequentialism
  • Marginal Cost of Public Funds

Public Goods

  • What are Public Goods?
  • Optimal Provision
  • Market Failure
  • Government Intervention
  • Government Provision of Public Goods


  • Externalities and Market Failure
  • Solutions to the Externality Problem
  • Commons and Congestion

Asymmetric Information

  • The Value of Insurance
  • Principal and Agent
  • Agency and Government

Cost Benefit Analysis

  • Potential Pareto Improvements
  • Opportunity Costs and CBA Fundamentals
  • Risk of Estimating Benefits
  • Cost-Benefit Analysis in Practice
  • Cost-Effectiveness Analysis

PART B: Public Choice

Public Choice

  • Democratic Process
  • Public Choice Mechanisms
  • Inefficiency with Majority Rule

Government Failure

  • Agency Problems
  • Monopoly Bureaucracy
  • Rent Seeking
  • Comparing Institutions
  • The Political Marketplace



  • Tax Systems
  • Taxes in Countries
  • Current Issues
  • Budgetary Process

Tax Incidence and Efficiency

  • Incidence and Partial Equilibrium
  • General Equilibrium Incidence
  • The Costs of Taxation
  • Optimal Taxation

Intertemporal Issues

  • Intertemporal Choice and Taxes
  • Debt and Government Budget Constraint
  • Long-term Consequences of Tax Policy

Taxes on Labour

  • Modelling Labour Supply
  • Income Tax and Inefficiency
  • Transfer Payments and Labour Supply

PART D: The Welfare State

Income Inequality

  • Measuring Inequality
  • Practical Issues
  • International Comparisons and Recent Trends
  • Explaining the Trends
  • Fundamental Causes


  • Defining Poverty
  • Measuring Poverty
  • Recent Trends in Poverty
  • Changing Nature of Poverty

Social Insurance and Welfare State

  • Social Insurance
  • Market Failure and Social Insurance
  • Welfare State and Social Insurance in Practice
  • Crisis in the Welfare State

Social Policy

  • Policies to Combat Poverty
  • Welfare State in the UK
  • Welfare Reform
  • Current Welfare System
  • Citizenship and the Welfare Stat

Pensions and Ageing

  • Pensions
  • Market Failure and Equity
  • Demographic Time Bomb
  • Pensioner Poverty
  • Changing Face of Society
  • Care and the Elderly


  • Economics of Healthcare
  • Market Failure and Healthcare
  • Healthcare Systems and their Weakness
  • Health Expenditure Escalation
  • Quasi markets and the Reform of Healthcare Systems

Education and Training

  • Optimal Investment
  • Market Failure
  • Reform of Education
  • Student Finance

PART E: Regulation and the Boundaries of the State

Privatisation and Social Ownership

  • Public or Private Ownership
  • Ownership
  • Incentives and Efficiency
  • Privatisation Process
  • Impact of Privatisation

Regulation and Competition Policy

  • Theory of Regulation
  • Regulation and Privatisation
  • Regulatory Bodies
  • Regulation of Privatised Industries in Practice

The Environment

  • Equity and Environment
  • Market-based Instruments and Environmental Policy
  • Roads and the Environment
  • Transboundary Pollution and the Global Commons
  • Global Warming

Federal Issues and the European Union

  • Layers of Government
  • The European Union
  • The Assignment Problem