Public Finance - Chapter 1 - Overview of Public Finance

Chương 1
TỔNG QUAN
VỀ TÀI CHÍNH CÔNG
NỘI DUNG
1.1. Khu vực công và tài chính công
1.2. Tài chính công và vai trò của chính phủ
1.3. Sự phát triển của tài chính công
2
TÀI LIỆU ĐỌC
▻ Chapter 1 - Gruber (2018), Public finance and public policy, 5th Ed.
▻ Chapter 1 - Stiglitz & Rosengard (2015), Economics of public sector, 4 th
Ed.
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1.1
KHU VỰC CÔNG
VÀ TÀI CHÍNH CÔNG
4
1.1.1. Khu vực công

▰ How many sectors are there in an economy?
▰ Which criteria differentiate those sectors?
5

 Ownership / Control
 Purpose
 Funding / Financing
Private
Voluntary
Public sector
sector
sector
6

▰ Private sector
▻ Organisations are owned by individuals.
▻ These businesses are driven by profit.
▻ The profit from private sector organisations benefits the owners, shareholders and investors.
▻ They are financed by private money from shareholders and by bank loans.
▰ Public sector
▻ Organisations are owned by the government.
▻ They provide goods and services for the benefit of the community.
▻ They are run by the government.
▻ They operate with money raised from taxes.
▰ Voluntary sector
▻ Organisations are owned and run voluntarily by trustees.
▻ These organisations are not run by the need to make profit but by the need to help the community.
▻ They operate with money from donations and gifts.
▻ Any profits are reinvested in the organisation.
▻ This sector’s organisations can be run as a social enterprise. 7

▰ Which institutions are comprised in the public sector?
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▰ The public sector consists of governments and all publicly controlled (1) or publicly funded (2)
agencies, enterprises, and other entities that deliver public programs, goods, or services (3).
▰ The concept of public sector is broader than simply that of core government and may overlap
with the not-for-profit or private sectors.
▰ The public sector consists of an expanding ring of organizations, with core government at the
center, followed by agencies and public enterprises.
▰ Around this ring is a gray zone consisting of publicly funded contractors and publicly owned
businesses, which may be, but for the most part are not, part of the public sector.
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Core government
▰ Core government consists of a governing body with a defined territorial authority.
▰ Core governments include all departments, ministries, or branches of the government that are
integral parts of the structure, and are accountable to and report directly to the central
authority — the legislature, council, cabinet, or executive head.
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Agencies
▰ Agencies consist of public organizations that are clearly a part of the government
and deliver public programs, goods, or services, but that exist as separate
organizations in their own right — possibly as legal entities — and operate with a
partial degree of operational independence.
▰ They often, but not necessarily, are headed by a board of directors, commission, or
other appointed body.
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Public enterprises
▰ Public enterprises are agencies that deliver public programs, goods, or services, but
operate independently of government and often have their own sources of revenue
in addition to direct public funding.
▰ They also may compete in private markets and may make profits.
▰ However, in most cases the government is the major shareholder, and these
enterprises partly follow the acts and regulations that govern the core government.
13

Gray zone
▰ Outside this clear public sector area is a gray zone, or boundary zone, with two types of organizations that
might or might not be part of the public sector.
▻ State businesses are government owned and controlled businesses that sell goods or services for
profit in the private market.
▻ Although they do not deliver what would be considered public programs, goods, or services,
they might be considered part of the public sector.
▻ Public contractors are legally independent entities outside government that receive public funding
— under contract or agreement — to deliver public programs, goods, or services as their primary
business.
▰ Due primarily to their limited public control, these organizations usually would be classified as not for-
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profit or private sector entities.

▰ Give an examples for public sector organizations at the following levels:
▻ International
▻ National
▻ Regional
▻ Local
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Type of public sector organizations
Public sector organizations may exist at any of four levels:
▰ International (multi-state entities or partnerships)
▻ Example:
▰ National (an independent state)
▻ Example:
▰ Regional (a province/state within a national state)
▻ Example:
▰ Local (a municipal-level body such as a city or county)
▻ Example:
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▰ What are criteria to determine whether a particular organization
belongs within the public sector?
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Criteria to determine whether a particular organization belongs within the public sector
1. Does the organization deliver programs, goods, or services that can be considered a public good or that are established
by government policy?
2. Is substantially all of the organization’s funding provided by government or determined by government policy?
3. Is the organization accountable to, and does it report directly to government, including a government department or
agency, or a minister of government?
4. If the organization has a board of directors, commission, or similar appointed body, does government control a majority
of appointments?
5. If the organization has share capital, is government the majority shareholder?
6. Are the organization’s employees members of the public service, subject to public service rules, and receiving public
service benefits?
7. Overall, does government control, directly or indirectly, the organization’s policies, operations, administration, or
service delivery?
8. Is there a legislative requirement for the organization to be audited by the government auditor or supreme audit 18
organization?

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▻ Funding
▻ Ownership
▻ Control
▻ Report
▻ Employee status
▻ Types of goods delivered
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1.1.2. Tài chính công

▰ What is finance?
▰ What is public finance?
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▰ The goal of public finance is to understand the proper role of the government in the economy.
▰ On the expenditures side of public finance
▻ What kind of services should the government provide, if any?
▻ Why should the government be spending hundreds of billions of dollars to provide health insurance to the
uninsured?
▻ Why is the government the primary provider of goods and services such as highways, education, and
transfers to the unemployed, while the provision of goods and services such as clothing, entertainment, and
property insurance is generally left to the private sector?
▰ On the revenue side of public finance
▻ How much should the government tax its citizens, and how should that amount be related to the economic
circumstances of those individuals?
▻ What kinds of activities should be taxed or be given tax relief in difficult times?
▻ What effect do taxes have on the functioning of the economy?
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▰ In the simplest terms, public finance is the study of the role of the government in the economy.
▰ This study involves answering the four questions of public finance:
▻ 1. When should the government intervene in the economy?
▻ 2. How might the government intervene?
▻ 3. What is the effect of those interventions on economic outcomes?
▻ 4. Why do governments choose to intervene in the way that they do?
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1. When should the government intervene in the economy?
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1. When should the government intervene in the economy?
▰ There are two reasons governments may want to intervene in market economies:
▻ Market failures
▻ If the competitive equilibrium does not lead to the efficiency-maximizing outcome,
there is the potential for efficiency improvement through government intervention.
▻ Redistribution
▻ The government concerns not only about the efficiency-maximizing outcome but also
about the way this outcome is distributed among different groups in the society.
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2. How might the government intervene?
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▰ There are several different general approaches that the government can take to intervention.
▻ Tax or subsidize private sale or purchase
▻ Restrict or mandate private sale or purchase
▻ Public provision
▻ Public financing of private provision
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▰ Tax or subsidize private sale or purchase
▻ Using the price mechanism whereby government policy is used to change the price of a
good in one of two ways:
▻ 1. Through taxes, which raise the price for private sales or purchases of goods that are
overproduced.
▻ Example:
▻ 2. Through subsidies, which lower the price for private sales or purchases of goods
that are underproduced.
▻ Example:
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▰ Restrict or mandate private sale or purchase
▻ Directly restricting private sale or purchase of goods that are overproduced or mandate
private purchase of goods that are underproduced and force individuals to buy that good.
▻ Example:
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▰ Public provision
▻ Providing the good directly in order to potentially attain the level of consumption that
maximizes social welfare.
▻ Example:
32

▰ Public financing of private provision
▻ Financing private entities to provide the desired level of provision.
▻ Example:
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3. What is the effect of those interventions on economic outcomes?
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3. What is the effect of those interventions on economic outcomes?
▰ In assessing the effects of government interventions, policy makers must keep in mind that any
policy has direct and indirect effects.
▻ Direct Effects
▻ The direct effects of government interventions are those effects that would be
predicted if individuals did not change their behavior in response to the interventions.
▻ Indirect Effects
▻ The indirect effects of government intervention are effects that arise only because
individuals change their behavior in response to the interventions.
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4. Why do governments choose to intervene in the way that they do?
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4. Why do governments choose to intervene in the way that they do?
▰ Governments face enormous challenges in figuring out what the public wants and how to choose
policies that match those wants.
▰ In addition, governments may be motivated by much more than simply correcting market failures or
redistributing income.
▰ Just as there are a host of market failures that can interfere with the welfare-maximizing outcome from
the private market, there are a host of government failures that can lead to inappropriate government
interventions.
▰ Politicians must consider a wide variety of viewpoints and pressures, only two of which are the
desire to design policies that maximize economic efficiency and redistribute resources in a socially
preferred manner.
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1.2
TÀI CHÍNH CÔNG
VÀ VAI TRÒ CỦA CHÍNH PHỦ
38
1.2.1. Vai trò của chính phủ

▰ Under which conditions is the existence of government necessary?
▰ Identify the conditions under which the existence of a government is unnecessary?
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▰ Conditions for private markets to yield an optimal allocation of goods and services
▻ 1. A market exists for every good and service.
▻ 2. Every market is characterized by perfect competition.
▻ 3. Everyone in each market has ready access to the same information.
▻ 4. Contract negotiation and enforcement have negligible costs.
▻ 5. Production functions exhibit decreasing returns to scale in production.
▻ 6. There are no externalities.
▻ 7. Producers can prevent those who do not pay for goods from having access to them.
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▰ Have you ever heard about market imperfections? Can you list some?
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▰ Consequences of market imperfections
▻ 1. Not all goods have ready markets.
▻ 2. Many markets are characterized by imperfect competition.
▻ 3. Imperfect information characterizes many markets.
▻ 4. Contract negotiation and enforcement are usually costly.
▻ 5. A few services exhibit steadily decreasing average cost.
▻ 6. Many goods have externalities, either negative or positive.
▻ 7. A few goods have the characteristic that, if anyone has access to them, everyone does, even those
who have not paid for them.
▻ 8. Sellers may have incentives to engage in market manipulation.
▻ 9. Markets may not yield a politically acceptable distribution of income and wealth.
▻ 10. Markets can experience large swings — pronounced business cycles and large booms and busts in 42
asset markets — if left unattended

▰ Because the key assumptions do not characterize reality, there is an economic case for government even in
a market economy.
▰ Governments should do what markets cannot.
▰ From an economic perspective, governments should devote effort to the following:
▻ 1. Address externalities
▻ 2. Address monopolies, natural and otherwise
▻ 3. Provide public goods
▻ 4. Address information failures
▻ 5. Provide macroeconomic stabilization
▻ 6. Provide social safety nets, to address concerns about the distribution of income
▻ 7. Provide a supportive legal framework and other services needed for markets to operate effectively
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▰ What are benefits of government intervention?
▰ What are costs of government intervention?
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▰ Costs of government activity
▻ Government action interferes with the outcome of private markets.
▻ Government action imposes ﬁnancial costs and administrative burdens.
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1.2.2. Vì sao chúng ta cần học tài chính công?

▰ What makes public finance so compelling is the dominant role that governments play in our
everyday lives.
▰ List of some interesting topics in public finance
▻ The size and growth of government
▻ Decentralization
▻ Spending, taxes, deficits, and debts
▻ Distribution of spending
▻ Distribution of revenue sources
▻ Regulatory role of the government
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▰ The size and growth of government
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▰ The size and growth of government
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▻ What explains the growth in government spending over the twentieth century?
1.2.2. Vì sao chúng ta cần học tài chính

công?
▰ Decentralization
▻ What is the appropriate extent of centralization and
decentralization in government activity?
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▰ Spending, taxes, deficits, and debts
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công?
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▻ Debt Levels of OECD Nations in 2014
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▻ Why are state and local governments able to balance their budgets, while the federal government is
not?
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công?
▰ Distribution of spending
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công?
▻ What is the appropriate type of spending to be done
at the federal versus state or local level?
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▰ Distribution of revenue sources
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▻ What are the implications of moving from taxing businesses and consumption to taxing workers’
earnings?
▻ What are the implications of shifting from taxation of property to taxation of income?
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▰ Regulatory role of the government
▻ Our discussion up to now has focused on the government as an entity that exerts influence through its
powers of taxation and spending
▻ Another critical role the government plays in all nations is that of regulating economic and social
activities.
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1.3
SỰ PHÁT TRIỂN
CỦA TÀI CHÍNH CÔNG
63
1.3. Sự phát triển của tài chính công
Mercantilists Laissez faire Welfare states
64
Câu hỏi ôn tập
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THANKS!
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Chương 1

1.1. Khu vực công và tài chính công

1.2. Tài chính công và vai trò của chính phủ

1.3. Sự phát triển của tài chính công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.1. Khu vực công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.1.2. Tài chính công

1.2.1. Vai trò của chính phủ

1.2.1. Vai trò của chính phủ

1.2.1. Vai trò của chính phủ

1.2.1. Vai trò của chính phủ

1.2.1. Vai trò của chính phủ

1.2.1. Vai trò của chính phủ

1.2.1. Vai trò của chính phủ

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính

1.2.2. Vì sao chúng ta cần học tài chính

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

1.2.2. Vì sao chúng ta cần học tài chính công?

Mercantilists Laissez faire Welfare states

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