Essays in development economics and public finance

This dissertation studies a range of topics in development economics and public finance. The first two chapters contain empirical studies on India addressing the impact of financial development on poverty and informality. Using time and state-level variation across Indian states, the first study examines the effect of financial liberalization in 1991on poverty and investigates the underlying mechanisms. The second study examines the effect of financial deepening and bank outreach on informality using micro data of Indian manufacturing sector. The next two chapters investigate the optimal government policy to reduce
tax evasion in a value-added tax (VAT) system. Chapter three addresses the problem of misreporting by registered traders in the VAT. The last chapter models the role of inter-sectoral linkages on tax evasion of informal firms in an input-output framework and justifies the results using Indian data.