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AN NBER PUBLICATION ISSUE: No. 4, April 2011

The Digest

A free monthly publication featuring non-technical summaries of research on topics of broad public interest
A portfolio strategy that focuses solely on opportunistic insider trades yields value-weight abnormal returns of 82 basis points per month. Corporate insiders are a unique and potentially valuable class of securities traders to study because they have access to private information about their firms. In Decoding Inside Information (NBER Working Paper No. 16454), authors Lauren Cohen, Christopher Malloy, and Lukasz Pomorski note that, although they possess private...

Research Summaries

Article
[The location response] to tax rates is especially pronounced for the most able and well-paid athletes. A new NBER study of 14 European nations finds that football players tend to locate in countries that have comparatively low income tax rates. This response to tax rates is especially pronounced for the most able and well-paid athletes, and is actually negative for the least able and lowest paid among the professionals. Often, national tax breaks designed to lure...
Article
A modest amount of government venture capital finance seems to improve the performance of entrepreneurial ventures relative to ventures supported purely by private venture capitalists. Some of the world's most influential enterprises, including Google, Intel, and Apple, were financed by venture capitalists. Rapidly growing entrepreneurial enterprises are thought to be important sources of innovation, employment, and productivity growth. Thus it is not surprising that...
Article
The "insurance effect" of strong anti-dismissal laws leads employees to increase their investment in innovative projects relative to their investment in routine projects. Although certain labor laws may inhibit firms from firing employees who fail to meet expectations, those same laws evidently benefit firms by encouraging their employees to engage in more innovative pursuits. In Labor Laws and Innovation (NBER Working Paper No. 16484), co-authors Viral Acharya,...
Article
The key factor that hinders investment and growth [following a financial crisis] is the decline in the supply of credit. There are two leading views on how financial crises can lead to recessions, both of which underline the role of financial constraints. The "illiquidity" view highlights the importance of a troubled banking sector: if it cannot provide credit to domestic firms, it forces them to decrease investment and output, and this potentially leads to recession...
Article
Women [who score in the upper third on a standardized test] have a net 8 percent reduction in pay during the first five years after giving birth. Having a child lowers a woman's lifetime earnings, but how much depends upon her skill level. In The Mommy Track Divides: The Impact of Childbearing on Wages of Women of Differing Skill Levels (NBER Working Paper No. 16582), co-authors Elizabeth Ty Wilde, Lily Batchelder, and David Ellwood estimate that having a child costs...

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