Nirupama Rao
Assistant Professor of Economics and Public Policy


DatePublication/Paper
2013

Rao, Nirupama S. 2013. Do Tax Credits Stimulate R&D Spending? The E ect of the R&D Tax Credit in its First Decade. (Working Paper). (Under Review).
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Abstract

This paper examines the impact of the R&D tax credit between 1981-1991 using condential IRS data from corporate tax returns. The key advances on previous work are an instrumental variables strategy based on tax law changes that addresses the simultaneity between R&D spending and its user cost and the use of new condential data. Estimates imply that a ten percent reduction in the user cost of R&D leads the average firm to increase its research intensity--the ratio of R&D spending to sales--by 11 percent in the short-run. Long-run estimates imply that rms do face adjustment costs and further increase spending over the longer-run. Analysis of the components of qualied research shows that wages and supplies account for the bulk of the increase in research spending. Comparisons of the elasticity across firms of dierent sizes, industries, tax status, multi-national status and credit history are also made. Neither small nor young firms appear more responsive in the static analysis but the dynamic model reveals stronger short-run responses, suggesting that they may face lower adjustment costs or liquidity constraints in financing R&D. Long-run and retiming analyses show no evidence that firms allocate their qualied research spending over time to maximize their R&D tax credits. Elasticities of qualifiied and total research intensities from a smaller sample suggest firms respond to user cost changes largely by increasing their qualified spending, meaning that what R&D the federal credit deems qualified research is an important margin on which the credit affects firm behavior.

Rao, Nirupama. 2013. Taxes and the Extraction of Exhaustible Resources: Evidence from California Oil Production. January 2013. (Under Review).
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Abstract

Rapid oil price increases frequently bring calls for special oil industry taxes. This paper uses new well-level production data and price variation induced by federal oil taxes and price controls to estimate how taxes affect production. Theory suggests temporary taxes create strong incentives for retiming productioneven well shutting. Empirical estimates suggest little shut-in in response to taxes, but substantial production retiming with an estimated elasticity between 0.208 and 0.261. The estimates are used to calibrate a simple model of the efficiency cost of tax-induced distortions, implying that a 15% tax reduces social efficiency by between 3% and 25% of the revenue raised.

2011

Rao, Nirupama, James Poterba and Jeri Seidman 2011. Deferred Tax Positions and Incentives for Corporate Behavior Around Corporate Tax Changes. National Tax Journal 64, 1 (March 2011): 27-57.
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Abstract

A firm's deferred tax position can influence how it is affected by a transition from one tax regime to another. We compile disaggregated deferred tax position data for a sample of large U.S. firms between 1993 and 2004 to explore how these positions might affect firm behavior before and after a pre-announced change in the statutory corporate tax rate. Our results suggest that the heterogeneous deferred tax positions of large U.S. corporations create substantial variation in the short-run effect of tax rate changes on reported earnings. Recognizing these divergent incentives is important for understanding the political economy of corporate tax reform.

2009

Rao, Nirupama and Pablo Kurlat 2009. Unemployment Insurance. in Governing America, Facts on File, New York, 2009 William E. Cunion and Paul Quirk, eds.
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Contact Details

nirupama.rao@nyu.edu
992-9861
Office Hours: By appointment
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Areas of Expertise

  • Economics
  • Environment
  • Finance
  • Law & Regulation
  • Taxation

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