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AN NBER PUBLICATION ISSUE: No. 1, January 2018

The Digest

A free monthly publication featuring non-technical summaries of research on topics of broad public interest
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Countries with higher interest rates and lower debt-to-GDP ratios at the start of a financial crisis use monetary and fiscal policy more aggressively and recover more quickly. Countries recovered from the global financial crisis of 2008 at very different rates. While Australia and South Korea were affected very little by the crisis, and output began growing in the United States and the United Kingdom within a year of the crisis, other nations — Portugal and Greece...

Research Summaries

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Article
Middle-class households tend to be heavily leveraged, with their homes as primary assets, while the rich tend to have more diverse investments. This made the middle class particularly vulnerable to the housing market crash. Wealth inequality in the U.S. rose steeply between 2007 to 2010, largely as a result of the sharp decline in house prices during that period, Edward N. Wolff reports in Household Wealth Trends in the United States, 1962 to 2016: Has Middle...
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Article
Because the lowest-cost oil producers are OPEC members, unrestrained production by cartel members would substantially reduce Russian and American shares of the world market. Every microeconomics textbook explains that a business with market power can increase its profit by restricting output. In some cases, such quantity restrictions can lead to production being shifted to other firms. If those firms are relatively high-cost producers, this misallocation of...
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A frequently used measure of the value of a private venture-backed company can overstate the company's worth because prices and conditions vary in successive rounds of financing. Private companies worth more than $1 billion — so-called "unicorns" — are frequently overvalued, according to a study of 135 such firms. Fast-growing firms are always hard to value, but the largest challenge in valuing these firms is their complex financial structure. Shares in such...
Article
Children who grow up in particularly innovative geographic areas, or who are exposed to inventors via family connections, are more likely to become inventors. American inventors are disproportionately likely to be white men who grew up in financially successful families. In Who Becomes an Inventor in America? The Importance of Exposure to Innovation (NBER Working Paper No. 24062), Alexander M. Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, and John Van Reenen...
Article
The total cost of taxpayers' compliance with the U.S. tax system may exceed 1 percent of GDP. Many Americans complain about how much of their earnings each year go to taxes. But in How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs (NBER Working Paper No. 23903), Youssef Benzarti shows that many taxpayers forgo tax savings in order to save the time, effort, and other costs required to itemize deductions on their returns. He estimates...

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