Syllabus (ECONOMICS)

Course Type: MAJ-7

Semester: 5

Course Code: BECOMAJ07T

Course Title: Trade Theory and Public Economics

(L-P-Tu): 5-0-1

Credit: 6

Practical/Theory: Theory

Course Objective:

Learning Outcome: Course Objective: This course is prepared to give a concrete foundation on Trade theories & Public Finance. Approaches of modern trade theories and identification of features of public goods will create ideas regarding governance of the state among the st

Group A: Trade Theory (45)

1. Basics of Trade Theory: (10)
   Arbitrage as basis and direction of trade; Fundamental sources of cross-country price differences and arbitrage; Concept of comparative advantage; Externalities, regulation and perverse comparative advantage; International equilibrium; offer curves; ToT and stability; Gains from Trade (GFT) Theorem; Concepts of Production possibility Frontier and Community Indifference curves; Illustration of GFT; Decomposition of GFT; Substitution possibilities and magnitude of GFT.
2. Technology and Trade (Ricardian Model): (15)
   Comparative versus Absolute Advantage; One-factor economy, production possibility frontier; Relative demand and relative supply; Terms of trade; Trade in Ricardian world; Determination of intermediate ToT; Complete specialization & GFT.
3. Factor Endowment & Trade (Heckscher-Ohlin-Samuelson Model): (20)
   H-O theorem and physical vs. price definitions of factor abundance; Properties of the HO model
   Factor intensity ranking; One-to-one correspondence between commodity price ratio & factor price ratio (Stolper-Samuelson theorem); One to one correspondence between endowment ratio and production proportion (Rybczysky’s theorem); Proof of HO theorem; Taste bias and invalidation of HO theorem; Empirical studies - Leontief Paradox; Effects of trade on factor price and income distribution; factor price equalization; factor intensity reversal & factor price equalization.

Group: B Public Economics (45)

1. Nature and Scope of Public Economics: (15)
   Market Failure and Government Intervention; Coase Theorem; Public Expenditure to finance Development.
2. Theory of Public Good: (15)
   Optimal provision of Public Goods; Private Provision and Public Provision of Public Goods;
   Lindahl Equilibrium; Voting Equilibrium.
3. Taxation: (15)
   Benefit Principle; Equal Sacrifice Principle; Ability to Pay Principle; Incidence and Burden of Taxes;
   Effects of taxation on income distribution; Work efforts, and on savings; The Laffer curve; Optimal Taxation.

Reading References:

(Trade Theory)

• P. Krugman and M. Obstfeld, International Economics, 8^th Edition, Pearson Education.
• R. Caves, J. Frankel and R.W. Jones, World Trades & Payments, 9^th Education, Pearson Education.
• Rajat Acharyya, International Economics; Oxford University Press.
• Giancarlo Gandolfo, 2014, International Trade Theory and Policy, Springer.
• Anne O. Krueger, 2020, International Trade: What Everyone Needs to Know, OUP.

(Public Economics)

• A.B. Atkinson and J.E. Stiglitz, 1980, Lectures on Public Economics, McGraw-Hill Inc.,US.
• C.V. Brown and P.M. Jackson, 1991, Public Sector Economics, Wiley-Blackwell; 4^th Edition.
• J.F. Due and A.F. Friedlander, 1994, Government Finance-Economics of Public Sector, AITBS Publishers and Distributors.
• J. Hindriks and G.D. Myles, 2006, Intermediate Public Economics, The MIT Press; Annotated Edition.
• R.A. Musgrave and P.B. Musgrave, 1989, Public Finance in Theory & Practice, McGraw Hill Publications, 5^th edition.
• Amaresh Bagchi, Readings in Public Finance, OUP.
• J.E. Stiglitz, 2000, Economics of Public Sector, W. W Norton and Company, 3^rd Edition.
• R.J. Chelliah, 2009, Towards Sustainable Growth, OUP.
• H.L. Bhatia, 1977, Public Finance, Vikas Publishing House, new Delhi.
• A. Ghosh and C. Ghosh, 2014, Public Finance, Prentice Hall India Learning Private Limited; 2^nd Revised edition.
• S. Mukherjee, A. Ghose and R.N. Nag, 2008, Analytical Public Finance, New Central Book Agency, Kolkata