This article talks about how to prepare for Indian Economics Services Exam, Paper 1. In my view, Paper 1 is most scoring, as it contains a sizeable portion of numericals. Here, I have given list of books and articles, which could be refrerred for every topic and sub-topic in the syllabus.
Guys, Paper 1, in Indian Economic Services consists of broadly three topics :
- Microeconomic Theory
- Mathematics for Economics
- Econometrics and Statistics
Micro consists of broadly 3/4th of syllabus of Paper 1. It needs to be done in sufficient detail, needless to mention that. In Micro, there are broadly five topics on which any aspirant is judged.
- Consumer Choice
- Production and Costs
- Theory of Value
- Distribution Theory
- Welfare Economics
For Consumer Theory, Hal Varian Chapters 2-13 can be used. These topics have been dealt accordingly in Varian. They have asked normally 4-5 questions based on consumer theory in almost every year, 2009 onwards. Please make some preparation of numericals too, as examiners have been inclined in recent years towards simple application based numericals. For Numericals, you can use, Varian Workbook. That is a good source for numericals. At least do (0) and (1) level problems from Varian Workbook.
This is added in the syllabus in Consumer Theory section. The best resource for this is Osborne. But you dont have to do complete book. You just have to know certain very basic definitions and very simple games. I have made certain videos for this, which I guess should suffice. Osborne also has a tutorial on internet, you can also take a help from that, if you dont want to get into a trouble of reading a book.
For Production and Costs, the best source is Nicholson and Snyder. This book has discussed theory and problems properly. For simple numericals, try to do, examples of these chapters, if not back questions. You will not be able to find the entire syllabus of this topic from Nicholson and Snyder, so you will have to resort to internet, but make sure, you use some academic source, not any random blog. Translog production function is discussed in the appendix of Nicholson’s Production Chapter.
I don’t know why, General Equilibrium is placed in this topic, in the syllabus. Its best placement could have been as a prelude to Welfare economics (Topic 5). Nevertheless, General Equilibrium, can be read from Ch 31-33 of Hal Varian. Also, do very simple numericals of Edgeworth box economy, at least Cobb Douglas-Cobb Douglas case. In 2009, they have also asked about Existence, uniqueness and stability of General Equilibrium. For comparison of General Equilibrium with Partial Equilibrium, relevant chapter on Partial Equilibrium can be read from Nicholson.
There is another sub-topic Measures of productive efficiency.I guess, the best would be to resort to Internet. I cant find the best book discussion this. Last I remember doing this topic, while in my undergraduate class, in Development course, using Leibenstein paper, which discussed X-efficiency.
Last sub-topic, Equilibrium of the firm and industry, can be taken up as Perfect Competition. I guess, this could also be better placed in Topic 3, Theory of Value. Anyhow, this topic can be done from Nicholson’s relevant chapter.
Theory of Value
This topic overlaps with Topic 3 of Paper 3 (Industrial Economics). Pricing under different market structures, is a lengthy topic, and should cover pricing under perfect competition, monopoly, oligopoly, monopolistic competition. This should be done from Nicholson and Snyder. Do very simple numericals for this sub-topic, either examples from Nicholson or (0) and (1) level problems from Varian Workbook.
Some other pricings, which have been asked in the syllabus could be done from Nicholson. They are not given as a separate chapter but discussed within Chapter 15, Nicholson. My suggestion is to do, Chapter 14 and 15 of Nicholson and Snyder. Don’t do signalling from Chapter 15. Peak load pricing is properly discussed in Oz Shy. You can also read Varian, for the relevant chapters on Monopoly and Oligopoly. In my view, Varian is little simpler for this topic than Nicholson.
Guys, remember this, that this topic again has to be dealt in Industrial Economics in Paper 3. I will be dealing with that in a separate post.
Another sub-topic, Marshallian and Walrasian stability, should be done from internet, as I have not found a good resource in any standard book.
Pricing with incomplete information and Moral Hazard problems, is being dealt in the last chapters of Varian under ‘Asymmetric information’ . Moral Hazard problems can be done as an extension of Uncertainty chapter. This is done mostly in Insurance problems. While preparing for Indian Economic Services (IES) exam, you can de-empahsize numericals from this topic, as I think there is a very remote possibility of asking numericals from this topic, but we never know, so don’t come to me next year, if you find a numerical there 🙂
Theory of Distribution
This topic should be done as an overview from Tamil Nadu Board Book, Class XII, Chapter- Theory of Distribution. This chapter will give a very good introduction to this topic. Marginal productivity theory should be done under the assumption of Perfect Competition and Imperfect Competition both. This is discussed as Pricing of Factors in Nicholson. You can use Varian also for this topic.
Euler’s Theorem can be done using Internet, but also do Clark’s Theorem in addition to that.
Bilateral Monopoly is discussed in Nicholson. Very simple numericals on pricing of factors can be done from Varian Workbook. Examples of Nicholson for this topic, in my view are little upper hand, so you can leave them if you want and can trust Varian workbook only. In that too, please do only very simple problems.
Macro Distribution Theories are discussed in Kaldor’s 1955 article. That’s an authentic source, so please use that.
No book is sufficient for this sub-topic, i.e. Welfare Economics. My take is, do relevant chapters from Nicholson as well as Varian. This will give you a broad outline for this topic.
Welfare Economics is a such a big course in itself and it contains many many sub-topics so what to leave and what to do becomes little difficult. The first sub-topic, i.e. aggregation problem, in itself is very broad. One has to depend upon the internet for this. I will be depending upon Amratya Sen’s book, Collective Choice and Social Welfare, for this topic. If you look at this book, you will find Sen has discussed every chapter intuitively first and then has gone ahead to discuss theorems based on that. Every chapter marked with * in his book, is full of theorems, which you can safely leave while preparing for Indian Economic Services, but should read intuition for that definitely.
Public goods and externalities, divergence between social and private welfare is discussed in the relevant chapter under Externalities in Nicholson. For this topic, you may de-emphasize mathematical approach of Nicholson and base your understanding primarily upon intuition provided. For Public goods, you can do very simple numericals from Varian workbook, even though I have not seen any numerical been asked from this topic from 2009 onwards. Do Coase theorem, too.
Compensation principle has been asked several times. Do this topic using internet. Hicks-Kaldor approach and Scitovisky’s approach has to be done under this sub-topic.
Pareto Optimality, would have been done already while doing Ch 31-33 of Varian. Comparison of Coase and Sen, has to be done using internet.
Mathematics for Economics
Guys, Mathematics for Economics is vast course, a complete course in economics, which has been given only as a sub-topic in Paper 1 of Indian Economic Services Exam (IES). Even looking at the syllabus, I find, this is vague. I have made some videos, using my intuition, for the topics which one should prepare, but they are in anyway not sufficient. While making notes for this topic, anyone can get confused because nobody can or should do complete Hammond and Sydsaeter ( a book on Mathematical Economics), neither one can leave this topic altogether.
My suggestion is to do functions, application of derivatives and integrals (their examples) in economics. For optimization, you must know what are first order and second order conditions; for linear algebra, do linear dependence and independence , orthogonality of vectors; in linear programming, you can use class 12th NCERT book, for very simple examples.
Input-output Model, I did last time in my undergrad class and the book we used was RS Bhardwaj. This topic should be surely done in Mathematics.
Statistical and Econometric Methods
For Econometrics, use Chapter 2-13 of Gujarati, Basic Econometrics. These are more than sufficient for Econometrics syllabus. In 2016, they have asked a question on Dickey Fuller Test, this is a topic in Univariate time series, I don’t find time series mentioned anywhere, but, since they have asked this becomes a topic to be done. My suggestion is to do a relevant chapter on Univariate Time series and Panel Data from Gujarati. Just an overview types, so that you will be in a position to write something if asked anything from these.
For Statistics,my suggestion is to use Nagar and Das. This is a small and crisp book, very good for understanding.
ANOVA, Factor Analysis, Discriminant Analysis and Principal Component Analysis should be done from internet.
Measures of income inequality can be done using Chapter 5 of Debraj Ray (Development Economics)
- Paper 1 is a scoring paper. Don’t leave any part untouched
- Past years are must.When you have prepared notes yourself, then do the relevant questions from past years
- Do some simple numericals too
- You can contact me on my mail or facebook or comments, if you have any query
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