coagglomeration index between sector _j_ and all other sectors that receive zero central excise tax incentives (or not treated). Everything else has the same meaning as in Equ.(3).

The coefficient on _Target_ now measures the direct effect of non-central excise tax incentives on the employment outcomes of all sectors, and the coefficient on the interaction term _Target X Treat_ measures the direct effect of central excise tax incentives on the treated sectors. Meanwhile, the coefficient on T T T × E captures the indirect impact of the New Industrial Policy through industries’ tendency to collocate with treated sectors. And the coefficient on TT T T T × E captures the indirect impact mm mm through industries’ tendency to collocate with nontreated sectors. NNTT mm mm One disadvantage of the coagglomeration index is that it does not distinguish between colocation tendency due to agglomeration forces from that caused by natural advantages. To better assess the impact of agglomeration forces, we construct indices to measure two important Marshallian mechanisms that can increase industries’ tendency to locate together and give rise to agglomeration, namely, inputoutput linkages and labor pooling.

The index on input-output linkages measures the extent that two sectors buy and sell from each other. It is computed from Input-Output accounts for India. Industries that serve intermediate inputs in the production processes of other sectors can minimize transportation costs by locating close to one another. In such a case, the growth of a central excise tax-incentivized sectors in Uttarakhand can induce other sectors linked through the value-chain to locate within the state.

The index on labor pooling captures the extent to which two sectors share the same type of workers. The information is based on sectors’ occupational characteristics reported by labor force surveys of India. Industries that require similar types of workers can also choose to locate in the same labor market to reduce matching costs and tap into suitable labor force in the market. In this case, the growth of a central excise tax-incentivized sectors in Uttarakhand can induce other sectors requiring similar types of labor to locate within the state.

Using these two indices, we investigate whether employment outcomes vary due to input-output linkages and/or labor pooling between industries in Uttarakhand relative to Uttar Pradesh at the border, following: m × T T T × T T T × T T 1 × T T T × I 2 × T T T × I 1 × T T T × Lmm 2 × T T Tmm × L mm D ;Tmm T TmmTT , T T mm m yy = αα+ ββ<sup>MM</sup> + γγ<sup>MM</sup> TT + θθ + θθ NNTT TT (5). NNTT mm mm mm mm mm mm mm mm mm + ηη +ηη + LL[D DDT TT TT ] + λλ + εε I represents the sum of the input-output linkage indices between sector _j_ and all other sectors that were treated. TT I represents the sum of the input-output linkage indices between sector _j_ and all other mm sectors that were not treated. NNTT L represents the sum of the labor pooling indices between sector _j_ and mm all other sectors that were treated, and TT L represents that between sector _j_ and all other sectors that mm were not treated. Everything else has the same meaning as in Equ.(4). NNTT mm As in (4), direct effects are controlled for in this specification. The coefficient on T T T × I measures the indirect impact of the New Industrial Policy through sectors’ buyer-seller relationship with TT mm mm treated sectors. The coefficient on T T T × I measures the indirect impact through sectors’ buyerseller relationship with nontreated sectors. The indirect impact due to sectors having similar labor NNTT mm mm 14