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AN NBER PUBLICATION ISSUE: No. 7, July 2008

The Digest

A free monthly publication featuring non-technical summaries of research on topics of broad public interest
Among managers with the strongest connection to senior officials (same school at the same time with the same degree), the connected holdings earned an average annual 16.05 percent excess return (the total gain minus the Treasury bill return). That was more than double the fund's average 7.69 percent excess return on non-connected stocks or the fund's overall average: 7.81 percent. "Who you know" -- often touted as the key to career success -- also may be a big part of...

Research Summaries

Article
Obesity prevalence rates will rise to 40 percent for men and 43 percent for women by 2020 ... Of those in the highest socioeconomic status (SES), 1.9 percent are obese at age 18 and 19.6 percent are obese at age 40. Of those in the low SES group, 4.6 percent are obese at age 18 and 31.3 percent are obese at age 40. NBER Research Associate Christopher Ruhm predicts that 33 percent of American men and 38 percent of American women will be obese (as defined by a body mass...
Article
U.S. equity Foreign Portfolio Investment in the average treaty country rose by over 90 percent relative to U.S. equity holdings in the average non-treaty country, in response to the large relative decrease in the dividend tax rate for corporations in treaty countries. Because so many other factors come into play, determining how taxes -- and particularly tax reforms -- influence portfolio choice traditionally has proven difficult to identify cleanly. But in Taxes And...
Article
Societies where the elite form a strong military in order to prevent democratization are more likely to later lapse into military dictatorships because the military retains some of its power during transitional democracy and can attempt a successful coup against democracy. Non-democratic regimes almost always rely on some degree of repression against competing groups, often exercised by the military. However, there has been little systematic analysis of why and how...
Article
Given that commodity prices are extremely volatile and difficult to predict -- and that commodity price futures are notoriously bad predictors of future commodity prices -- this new approach to predicting commodity prices has important potential practical value. A recent study by co-authors Yu-Chin Chen, Kenneth Rogoff, and Barbara Rossi -- Can Exchange Rates Forecast Commodity Prices? (NBER Working Paper No. 13901) -- demonstrates that exchange rates can be used to...
Article
Capital account liberalization in developing countries reduces the cost of capital, temporarily increases investment, and permanently raises the level of GDP per capita. In the late 1980s developing countries all over the world began easing restrictions on capital flows. A decade later many of the same nations experienced a string of financial crises, triggering a debate over the relative merits of capital account liberalization as a policy choice for developing...

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