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AN NBER PUBLICATION ISSUE: No. 11, November 2002

The Digest

A free monthly publication featuring non-technical summaries of research on topics of broad public interest
Inequality of after tax labor income has increased by 25 percent in the 1972-98 period. Yet consumption inequality has risen less than 2 percent. It is well documented that the gap between the richest and poorest Americans, in terms of earnings and income, has become wider over the last 25 years. But it is less well known that, despite this increase in "income inequality," the range of consumption among individuals has changed very little. Although in terms of income...

Research Summaries

Article
Openness, measured as the ratio of trade to income, appears to reduce air pollution. Opponents of globalization claim that international trade harms the environment. They believe that, becausethat in open economies a "race to the bottom" in environmental standards will result from governments' fears that enhanced environmental regulation will hurt their international competitiveness, the result is a "race to the bottom" in environmental standards. In Is Trade Good or...
Article
The authors show that the supply of credit falls, and the demand for credit rises, when non-corporate firms are located in states with higher bankruptcy exemptions. Small businesses are the primary job engine in the U.S. economy. From 1990 to 1995, businesses with fewer than 500 employees accounted for 76.5 percent of net new jobs. But small businesses are, by their nature, volatile. Over 13 percent of U.S. jobs in 1995 were in firms that did not exist before 1990 and...
Article
Replacing the current personal and corporate income taxes with a 20 percent flat tax should virtually triple the amount of entrepreneurial activity. In Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S. (NBER Working Paper No. 9015), authors Julie Berry Cullen and Roger Gordon explore how taxes affect the decision to start a new business. Individuals can choose how much they work for themselves or work for someone else. Even if this choice does not...
Article
Increases in female labor supply decreased both female and male wages, but had a stronger effect on women. In Women, War, and Wages: The Effect of Female Labor Supply on the Wage Structure at Mid-Century (NBER Working Paper No. 9013), authors Daron Acemoglu, David Autor, and David Lyle study the effect of women's work on wages, looking at the period before and after WWII. The authors focus on the growth of female employment from 1940 to shortly after the war, in 1950...
Article
Tax cheating becomes more acceptable to citizens as government grows. Economists have long recognized the critical role that citizens' trust in each other and their institutions plays in influencing economic performance. In high-trust societies, individuals need to spend fewer resources to protect themselves from being exploited in economic transactions. But the importance of trust also extends to the relationship between citizens and their government, in the sense...

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