Programme PhD Term V Academic Year 2021-22

Course title Decentralization and Public Policy Area Economics Credits 1.50

Prof. Hari Nagarajan

Course Description & Objectives
Course content:

The purpose of this course is to illustrate the role of decentralization in enabling the formulation of effective public policies. The underlying premise is that public policies are often ineffective due to a combination of agency effects and moral hazard leading to ineffective implementation. These combine to adversely affect the welfare of the stakeholders. In rural India this problem is magnified due to the diversity and also the fact that the designs of most programs are flawed.
Decentralization is a policy response to reduce the adverse effects arising from poorly designed and implemented policies.However, decentralization in of itself might not remove agency problems, but in fact could end up magnifying problems of adverse selection and moral hazard.
In these lectures, we will show that decentralization is at best a necessary condition for effective public policy. Democratization, however, is a sufficient condition, since it enables households to participate in the process of design, provision and management of public goods and services.

In this course we shall use Panchayats (rural local bodies) as an example of effective decentralization to illustrate a number of outcomes germane to public policy. In this process we will link policy making, with households and explore ways in which policies germane to public goods, empowerment of women, vulnerability mitigation, local public finances and reduction corruption could be optimally designed. We shall see for example how households could use institutions to mitigate vulnerability, and access public goods.

The first half of the course will focus on explaining some of the theory related to decentralization and democratization. In the second half specific problems that could be addressed by policy will be discussed. The design of this course is such that the theory will be discussed first followed by presentation of empirical results.

To be able to understand the micro-foundations of policy making.  Policy analysis often ignores the role of micro data, how the data has to collected and appropriate data analysis. The course seeks to link problems germane to policy making, appropriate tools of analysis, methods of data collection and properties of such data that have been collected.

Learning Outcomes:
  1. Problem identification: how does one identify a problem that can be suitably solved through policy.
  2. Appropriate use of econometrics: The course is designed to teach students methods of econometric analysis in an entirely applied manner.
  3. Students of management will in particularly be able to see the links between economic theory and management of problems related to household behavior.

The course is lecture based. The copies of all the lectures will be made available in the beginning of the course. The mandatory readings will be discussed in class. Problem sets will be given and these will address specific issues related to topics discussed in the class.