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Assistant Professor of Business Administration,
Stephen M. Ross School of Business
University of Michigan, Ann Arbor

nirurao [at] umich [dot] edu

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I am an Assistant Professor of Business Economics and Public Policy at the Stephen M. Ross School of Business at the University of Michigan. My research largely centers on the economic effects of fiscal policy, focusing on the impact of tax policy on firm production, investment and pricing decisions.

I am a recipient of the National Tax Association Dissertation Award and the 2019 Journal of Public Economics Atkinson award for the best paper in the published in the prior three years. I completed my PhD in economics at MIT in June 2010 where I previously earned my undergraduate degree. Prior to graduate school, I worked at the Andrew W. Mellon Foundation. I recently served as a Senior Economist from 2015 through 2016 at the Council of Economic Advisers in Washington, D.C.


with Max Risch

Reject and resubmit, Quarterly Journal of Economics

March 2024

A common concern surrounding minimum wage policies is their impact on independent businesses, which are feared to be less able to either bear or pass-on cost increases. We examine how independent firms accommodate minimum wage increases along product and labor market margins using a new matched owner-firm-worker panel dataset drawn from the universe of U.S. tax records over a 10-year period. We find that, on average, firms in highly exposed industries do not substantially reduce employment, but instead fully finance the added labor costs with new revenues. Among surviving firms, we even observe small average increases in owner profits. We show, however, that these average gains belie significant heterogeneity by industry and productivity. Among restaurants, the most acutely impacted industry, the minimum wage causes firm exits. Exits are concentrated among the least productive small firms, while the observed profit gains stem from the more productive surviving small restaurants. These findings are consistent with a model of Cournot competition with heterogeneous productivity and fixed production costs. The cost shock and resulting exits winnow the productivity distribution of surviving and entrant firms with demand and workers reallocated to more productive survivors. Following low-earning and young workers, we find that their earnings increase on average, they are no less likely to be employed, and their turnover rates decline when minimum wages rise.

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with Chris Conlon

January 2023

Products with negative externalities are often subject to regulations that limit competition. The single-product case may suggest that it is irrelevant for aggregate welfare whether output is restricted via corrective taxes or limiting competition. However, when products are differentiated curbing consumption through market power can be costly. Firms with market power may not only reduce total quantity, but distort the purchase decisions of inframarginal consumers. We examine a common regulation known as post-and-hold (PH) used by a dozen states for the sale of alcoholic beverages. Theoretically, PH eliminates competitive incentives among wholesalers selling identical products. We assemble unique data on distilled spirits from Connecticut,including matched manufacturer and wholesaler prices, to evaluate the welfare consequences of PH. For similar levels of ethanol consumption, PH leads to substantially lower consumer welfare (and government revenue) compared to excise, sales or Ramsey taxes by distorting consumption choices away from high-quality/premium brands and towards low-quality brands. Replacing PH with volumetric or ethanol-based taxes could reduce consumption by over 9% without reducing consumer surplus, and increase tax revenues by over 300%.

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Please see my CV for a full list of publications

with Chris Conlon and Yinan Wang

Review of Economics and Statistics


We find that sin-good purchases are highly concentrated, with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin-tax burdens are poorly explained by demographics (including income), but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 63% of sin taxes, are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.

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with Chris Conlon

American Economic Journal: Economic Policy

November 2020

This paper uses UPC-level data to examine the relationship between excise taxes, retail prices, and consumer welfare in the distilled spirits market. We document a nominal rigidity in retail prices that arises because firms largely choose prices that end in 99 cents and change prices in whole-dollar increments. A correctly specified model, like an ordered logit, takes this discreteness into account when predicting the effects of alternative taxes. Explicitly accounting for price points substantially impacts estimates of tax incidence and the excess burden cost of tax revenue. Meaningful nonmonotonicities in these quantities expand the potential considerations in setting excise taxes.

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American Economic Journal: Economic Policy

November 2018

The recent boom in US oil production has prompted debates on levying new taxes on oil. This paper uses new well-level production data and price variation from federal oil taxes and price controls to assess how taxes affected production. After-tax price elasticity estimates range between 0.295 (0.038) and 0.371 (0.025). Response along the shut-in margin is minimal. There is no evidence of spatial shifting of production to minimize tax liabilities. Taken together, the results suggest that taxes reduced domestic production in the 1980s, and the response largely came from wells that continued to pump oil, but at a reduced rate.

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Journal of Public Economics

August 2016

This paper examines the impact of the U.S. federal R&D tax credit between 1981–1991 using confidential IRS data from corporate tax returns. The empirical analysis makes two key advances on previous work. First, it implements a new instrumental variables (IV) strategy based on tax changes that directly addresses the simultaneity of R&D spending and marginal credit rates. Second, the analysis makes use of new restricted- access IRS corporate return data describing R&D expenditures. Estimates imply that a10% 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 19.8% in the short-run. Long-run estimates imply that the average firm faces adjustment costs and increases spending over time, though small and young firms show evidence of reversing initial increases. Analysis of the components of qualified research shows that wages and supplies account for the bulk of the increase in research spending. Elasticities of qualified and total research intensities from a smaller sample suggest firms respond to user cost changes largely by increasing their qualified spending, meaning that the type of R&D the federal credit deems qualified research is an important margin on which the credit affects firm behavior.

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with Don Fullerton

National Tax Journal

June 2019

News that 47 percent of Americans in 2009 paid no federal income tax drew considerable attention. For a longer view of not paying tax and of receiving transfers, we use the Panel Survey of Income Dynamics. Over all individuals, we find that 68 percent owe no income tax at least one year, of which 21 percent pay the following year and 45 percent pay within five years. Also, overall, 60 percent receive transfers other than Social Security at least one year, of which nearly 47 percent stop the next year and more than 94 percent stop within10 years.

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