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Agglomeration Taxes In The Indian States Due To Wider Economic Benefits: An Empirical Assessment

Author

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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)

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.

Suggested Citation

  • Saloni Bhutani & Alok Kumar Mishra, 2024. "Agglomeration Taxes In The Indian States Due To Wider Economic Benefits: An Empirical Assessment," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(02), pages 667-696, March.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:02:n:s0217590821410113
    DOI: 10.1142/S0217590821410113
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    More about this item

    Keywords

    Urbanization; agglomeration externalities; economic growth; wider economic benefits; spatial contiguity; cooperative federalism;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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