The Effects of the Length of the Tax-Loss Carryback Period on Tax Receipts and Corporate Marginal Tax Rates
We investigate how the length of the net operating loss carryback period affects corporate liquidity and marginal tax rates. We estimate that extending the carryback period from two to five years, as recently proposed in President Obama's budget blueprint, would provide $19 ($34) billion of additional liquidity to the corporate sector for 2008 (2009). Our calculations imply that the benefits of the extended Carryback period would be concentrated in the homebuilding, automobile, and financial industries. Extending the carryback period would increase the marginal tax rate of loss firms by more than 200 basis points on average, which all else equal would lead corporations to use an additional $8 ($10) billion of debt and reduce tax payments by another $1.2 ($1.5) billion in 2008 (2009). Overall, the tax breakproposed by the Obama administration would have a significant liquidity effect on corporations suffering large losses in recent years. If the tax proposal were extended to include TARP firms, the liquidity effect would triple in size.
Transversality and the Stochastic Nature of Cash Flows
We show that a transversality condition is necessary when it comes to valuing a company with an infinite lifespan. Without transversality the firm value cannot be uniquely determined. Also, an assumption on a lower bound of cash flows is necessary to achieve the desired result. We discuss four different stochastic cash flow processes and analyze to what extent the processes associated with these enterprise values satisfy the transversality condition.
Did the metamorphosis from Export Processing Zones to Special Economic Zones improve the efficiency of trade enclaves in India?
In this paper, the efficiency of seven conventional Special Economic Zones in India is analyzed, by adopting a stochastic production frontier technique, for the period between 1986–1987 and 2007–2008.Results indicate that although the efficiency scores of these enclaves have improved over the years, specifically with the introduction of the SEZ policy (2000–2001), it is far below the threshold level as identified in the literature. Besides, one can also observe a discrepancy emerging between better export earning zones and efficient zones. On the determinants side, policy intervention and large geographical area, accompanied by clustering of units, are found to have impacted the efficiency scores of these enclaves positively.