AGGLOMERATION TAXES IN THE INDIAN STATES DUE TO WIDER ECONOMIC BENEFITS: AN EMPIRICAL ASSESSMENT

Saloni Bhutani () and Alok Kumar Mishra
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Saloni Bhutani: School of Economics, University of Hyderabad, Prof. C. R. Rao Road, Gachibowli, Hyderabad, Telangana 500046, India
Alok Kumar Mishra: School of Economics, University of Hyderabad, Prof. C. R. Rao Road, Gachibowli, Hyderabad, Telangana 500046, India

The Singapore Economic Review (SER), 2024, vol. 69, issue 02, 667-696

Abstract: This paper carries out an empirical study to examine the contribution of urban areas in generating tax revenue and growth at 28 Indian state levels. The study is based on the hypothesis that the productivity and agglomeration externality effects present in cities, known as “wider economic benefits†, lead to enhanced tax bases of State Governments. The cross-sectional estimation has confirmed that urbanization and state gross domestic product per capita significantly contribute to the tax bases of State Governments, such as sales tax, stamps, registration duty and motor vehicle tax. These three agglomeration taxes (including goods and services tax) are recommended for sharing with urban local bodies.

Keywords: Urbanization; agglomeration externalities; economic growth; wider economic benefits; spatial contiguity; cooperative federalism (search for similar items in EconPapers)
JEL-codes: E62 F43 H30 H71 R00 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0217590821410113

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