Place-Based Preferential Preferential Tax Policy and Its Spatial Effects: Evidence from India’s Program on Industrially Backward Districts

Rana Hasan (rhasan@adb.org), Yi Jiang (yijiang@adb.org) and Radine Michelle Rafols (radine.rafols@gmail.com)
Additional contact information
Rana Hasan: Asian Development Bank
Yi Jiang: Asian Development Bank
Radine Michelle Rafols: Asian Development Bank

No 524, ADB Economics Working Paper Series from Asian Development Bank

Abstract: The Government of India initiated a program in 1994 to promote manufacturing in districts designated as backward. The way the backward districts were identified enables us to employ a regression discontinuity design to evaluate the impacts of the program. We find that the program’s 5-year tax exemption to manufacturers led to a significant increase in firm entry and employment in relatively better-off backward districts, particularly in light manufacturing industries. However, the program also resulted in negative spillover effects in districts which were neighboring these backward districts and relatively weaker in economic activity. The findings emphasize that the spatial effects of place-based policies deserve greater attention from policy makers.

Keywords: backward districts; place-based policy; preferential tax; sharp regression discontinuity; spatial spillovers (search for similar items in EconPapers)
JEL-codes: H32 O14 R12 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2017-11-16
New Economics Papers: this item is included in nep-geo, nep-ure and nep-war
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Citations: View citations in EconPapers (1)

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