Journal of Development Studies
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MSM Program Chair and Alumna Publish Joint Study on Impact of Location-Based Tax Incentives for Non-Farm Rural Enterprises in Armenia

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YEREVAN, Armenia American University of Armenia (AUA) Master of Science in Management (MSM) Program Chair Dr. Vardan Baghdasaryan and alumna and adjunct lecturer Arsine Sarikyan (MSM ’20) published their joint study on “Location-Based Tax Incentives for Non-Farm Rural Enterprises in Armenia” in the Journal of Development Studies. Within the realm of economic research, this publication sheds light on the impact of tax exemptions on the performance of rural non-farm small businesses in Armenia.

The article investigates the effectiveness of location-based tax incentives granted to businesses in specific geographic areas, particularly border communities in Armenia. This intervention, initiated in 2015, aimed to promote social and economic development in regions affected by military conflicts by granting pervasive tax exemptions.

“In the pursuit of precision and impartiality in our research, our foremost challenge was ensuring the comparability of treatment and control groups,” Sarikyan explains. “Faced with insufficient tabular data, I recalled a valuable lesson from our coursework on utilizing satellite night-time luminosity data, which can be used as a robust estimator for overall economic activity — both formal and informal. Drawing upon this knowledge, we engineered a night light score for targeted areas, which enabled us to successfully validate the crucial common trend assumption, thereby enhancing the reliability of our study’s outcomes.” 

According to Dr. Baghdasaryan, the study contributes to discussions on the effectiveness of tax exemptions in promoting business growth. The specific contribution is the consideration of the unintended consequences of such policies, as ignoring these consequences can mask the outcomes of the reforms. In this particular case, the policy also resulted in a drop in tax audits; ignoring this would underestimate the impact of the intervention.

The research conducted by Dr. Baghdasaryan and Sarikyan provides valuable insight into the complexities of place-based tax incentives. Their work encourages a deeper understanding of the multifaceted dynamics between fiscal policies and business performance, particularly in the context of rural development. As discussions on economic interventions continue, this study serves as a crucial reference for policymakers and researchers alike.

Founded in 1991, the American University of Armenia (AUA) is a private, independent university located in Yerevan, Armenia, affiliated with the University of California, and accredited by the WASC Senior College and University Commission in the United States. AUA provides local and international students with Western-style education through top-quality undergraduate and graduate degree and certificate programs, promotes research and innovation, encourages civic engagement and community service, and fosters democratic values.