Job Market Paper
Domestic Tax Reform, New Inputs, and Productivity: Evidence from Indian Manufacturing
📄 Link to the current version.
Abstract: Can commodity taxes distort plants’ input sourcing and production decisions? This paper investigates the impact of India’s 2017 Goods and Services Tax reform, which replaced a fragmented tax system with a nationwide one and eliminated cumulative taxes on out-of-state transactions. Using a panel of manufacturing plants from 2012 to 2022, and exploiting heterogeneity in their eligibility to the reform, I employ a difference-in-differences approach to compare treated plants able to claim input taxes with untreated ones. The results show that treated plants increase input sourcing post-reform, particularly through newly acquired imported inputs. The effects are stronger in inland states, and stronger in industries with lower input tariffs. Production is also impacted, as treated plants' producticity and product scope increases relatively more, and highly-taxed plants start adjusting their product mix to become eligible to the credits.
Working papers
How Trade and Labor Market Institutions Shape Informality: Evidence from Indian Microdata
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.