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AN NBER PUBLICATION ISSUE: No. 8, August 2003

The Digest

A free monthly publication featuring non-technical summaries of research on topics of broad public interest
...tires made in Decatur during the labor dispute were some 15 times more likely to have resulted in a financial claim against the company than were tires manufactured in other plants. In August 2000, Bridgestone/Firestone and Ford jointly announced the recall of 14.4 million tires, some 6.5 million of them still on the road, mostly on Ford Explorers. It was big business news, especially after the National Highway Traffic and Safety Administration (NHTSA) the...

Research Summaries

Article
The results suggest that students make rational choices. Colleges work hard to lure exceptionally high achieving students. Typically, high achieving students can expect to receive individualized packages of loans, grants, and work opportunities from each school where they apply. The package structure will depend on parents' ability to pay, the student's demonstrated ability, and how well the college thinks the student fits its needs. If students are rational investors...
Article
Large firms have destroyed $226 billion of shareholder wealth over 20 years. In contrast, small firms, defined as companies whose market capitalization is equivalent to the smallest 25 percent of companies listed on the NYSE in each year, created $8 billion of shareholder wealth through their transactions. Mergers and acquisitions destroy shareholder wealth in the acquiring companies. New research from the NBER shows that, over the past 20 years, U.S. takeovers have...
Article
A $1 increase in health insurance premiums leads to a 52-cent increase in employee expenditures on health insurance. As insurance premiums rise, the use of flexible benefit plans, in which employees explicitly choose how to allocate compensation between cash and various benefits, has been increasing in the United States. Currently, approximately 13 percent of workers in medium and large firms are covered by such plans. In The Reallocation of Compensation In...
Article
Three things happen when emerging economies open their stock markets to foreign investors. First, the aggregate dividend yield falls by an average of 240 basis points. Second, the growth rate of the capital stock increases by an average of 1.1 percentage points per year. Third, the growth rate of output per worker rises by 2.3 percentage points per year. Capital account liberalization policies have fallen from favor in recent years. Initially they were touted as a way...
Article
...state-mandated testing for teachers increases their wages by 3 to 5 percent but has no observable effect on their quality. As of 1999, 43 states required prospective teachers to pass a certification test. Proponents of testing say that it establishes minimum quality standards. Economists have long been skeptical of such claims, pointing out that there is little evidence that licensing requirements create benefits for consumers and quite a bit of evidence to suggest...

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