Working papers
Trade, Local Labor Market Institutions and Informality: Micro-Level Evidence from India
Joint with Pamela Bombarda and Maria Bas
Abstract: This paper examines the effects of India's trade liberalization since the 1990s on firm and labor informality. Relying on different sets of data, we apply a difference-in-differences methodology, exploiting exogenous variation in industry-level tariffs to assess how tariff changes have shaped informality. Our findings indicate that import competition leads to higher informality within industries that undergo substantial tariff reductions. However, the presence of lower-cost foreign intermediates promotes formal employment, effectively offsetting the adverse impacts of import competition. Notably, reductions in input tariffs resulted in a net increase in formal employment ranging from 6.5 to 15 percentage points. Crucially, these effects vary across states and depend on the labor market institutions considered. Industries that enjoyed access to cheaper foreign intermediates located in states with pro-worker labor market institutions experienced an increase in formal employment relative to those in pro-employer states.
Work in progress
Domestic Tax Reform, Input Sourcing and the Structure of Production
Abstract: This paper investigates the impact of India’s 2017 Goods and Services Tax (GST) reform, which replaced a fragmented commodity taxation system with a nationwide Value-Added Tax (VAT) and eliminated cascading taxes on cross-state transactions. Using a panel of manufacturing firms from 2012 to 2020, and exploiting heterogeneity in firms' eligibility for input tax credits, I employ a difference-in-differences approach to compare treated firms—those able to claim input tax credits—with untreated firms. The results show that treated firms increase input sourcing post-reform, particularly through newly acquired inputs. The findings indicate that reductions in input costs significantly influence firms’ sourcing and production decisions, with some firms adjusting their product mix to gain access to tax credits. Additionally, the reform appears to have facilitated greater international sourcing of inputs, especially for treated firms in inland states, and there is evidence of complementarity between lower input tariffs and GST exposure.