On tariff elimination, trade harmonization, and household well‐being: A study of the GST rollout in India

Abstract

AbstractThe transformative research agenda encourages the pursuit of questions emphasizing societal welfare and well‐being outcomes rather than (just) focusing on narrow, incremental business‐related outcomes. This paper addresses that premise by examining those households at the social and economic bottom of the pyramid (BOP) that are intended to benefit most from the removal of trade barriers. The removal of these barriers should enable supply chains to yield commercial and welfare efficiency in terms of economic surpluses. The Goods and Services Tax legislation implemented in India in 2017 sought to do just that, serving as the experimental testbed for our investigation. Yet, as our analysis of more than 50,000 unique households in the Consumer Pyramids Household Survey data indicates, those at the social and geographic BOP see less benefit than others from the same policy intervention. This runs counter to the intended consequences of such policies. We employ a middle‐range theorizing approach grounded in the Theory of Customs Unions to inform and substantiate our hypotheses, which are tested using a stochastic frontier analysis and truncated regression. The results hold implications for policymakers and organizations seeking to elevate the efficacy of supply chains orchestrated by and serving BOP populations.