Assaf Razin: Biographical Notes

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The Economy of Modern Israel: Malaise and Promise

Hardcover (September 1993) University of Chicago Press;

The book covers the entire economic history of the state, focusing on links between Israel's

economic growth, its integration into world markets, its tax and welfare systems, and the

political conflicts in the Middle East. It presents the first detailed economic analysis of the

Palestinian uprising, showing how the unrest has led to a fall in Arab employment in Israel and

serious economic loss to the occupied territories with some loss to Israel. The book also

examines how the uprising has affected Israel's financial standing internationally and the

inflow of foreign aid. The book, written at the very start of the waves of immigration from the

former Soviet Union, see the long run promise for Israel's economy, despite the initial

difficulties in absorbing the immigrants. The book flashes out the coexistence of a flourishing

and highly competitive private sector with a relatively large public sector, which is undergoing

privatization; and a tax structure that encourages long- term saving and business growth. By

examining the interplay between the exchange rate, interest rates, and monetary and

policies, the book investigates the possibilities for renewed growth and concludes,

anti-inflation at the point of time it was completed, 1991, before the Oslo agreement and the peace with

Jordan, that the future of Israel's economy crucially depends on serious efforts to secure

peace in the Middle East.

11. Assaf Razin and Efraim Sadka

Population Economics (January 1995)

MIT Press;

In the book we analyze two family education -fertility regimes which we refer to as “children as capital

goods” and “children as consumption goods”, respectively. The as “children as capital goods” regime

means that parents treat their children as a “capital good” , bringing them up and investing in them with the

goal that the children when they grow up will take care of their parents who reach an old age. This is a

good model to analyze fertility choices in traditional economies (especially rural economies) where the

representative household has no good access to financial market in order to save for old age. Social

so-called security and public education do not exist. In the “children as consumption goods” regime financial

markets are well developed and the government provides old age social security. Fertility decision is based

on altruistic and kinship motives, predominantly. Parents, who are caring for the welfare of their children,

bring out fewer children, but invest more in the education of each one of them. Children in this regime are

costly, because of the high level of education invested in them.
12. Gian Maria Milesi- Ferretti and Assaf Razin

Current- Account Sustainability

(Princeton Studies in International Finance, No 81)

(November 1996) Princeton University, International Finance Section;

Two key questions that arise in macroeconomic policy analysis are whether a given level of the

current account deficit is "appropriate" or "excessive," and whether the current account balance is

sustainable. 1 Researchers who try to quantify these concepts face several difficulties. Establishing

whether a given level of the current account is excessive requires a model or a framework that can

determine what the "optimal" or "appropriate" level of the current account is— clearly not an easy

task. Defining current account sustainability is also a difficult endeavor: the current account is the

quintessential endogenous variable, and it is determined not just by public policy but also by private

agents' saving and investment decisions. Therefore, automatically extrapolating the current level of

this variable into the future, in order to assess whether a country will be able to service its liabilities

and/ or secure access to external financing for future liabilities, is an exercise fraught with

uncertainties. Notwithstanding the difficulties highlighted above, a substantial portion of research at

the IMF on the current account has indeed focused on these two related questions of "optimal"

levels and sustainability. Some other papers have instead studied current account determinants and

responses to shocks in both industrial and developing countries. A literature review of the two

research approaches is presented below.

13. Jacob Frenkel and Assaf Razin,

Fiscal Policies and Growth in the World Economy

2nd edition (1992) MIT Press

Third Edition, with the cooperation of Chi- Wa Yuen (October 1992)

MIT Press;

14. Assaf Razin and Efraim Sadka
Labor, Capital, and Finance: International Flows

Cambridge University Press, Paperback (September, 2001)

Chinese edition 2003
15. Assaf Razin, and Efraim Sadka,


MIT Press, 2005.

In the coming decades, the population of the industrialized world is

forecast to age dramatically. In the European Union, before the 2004

enlargement, old- age dependency, defined as the ratio of the population aged 60

and older to those between ages 15 and 59, is projected to rise from 35 percent in

2000 to 66 percent, in 2050. Within the European Union, aging is expected to be

most pronounced in Germany, Italy and Spain, where this ratio is forecast to rise

to 71, 76 and 81 percent, respectively, by 2050. Aging trends are almost as severe

in Japan, where old- age dependency is forecast to rise from 36 to 70

percent over the same period. In comparison, the projected population trends in

the United States look almost benign. The Census Bureau currently forecasts

that the old- age dependency ratio will reach 47 percent in 2050, up from 27

percent in 2000. The aging of the population has far- reaching implications for

national pension systems. In the continental Europe, most state pension systems

are unfunded (pay- as- you- go systems) and the benefits are quite generous. This

will necessitate a sharp rise in taxes if benefits are maintained largely intact.

The O. E. C. D. predicts that France, for example, will have to spend 33 percent

more as a share of gross domestic product than it does now.

Similarly, the widespread low- skill migration also puts a strain on the

public finance soundedness of the welfare state. Being relatively low earners,

migrants are typically net beneficiaries of the welfare state, that is, they are

expected to receive benefits in excess of the taxes (contributions) they pay.
16. Assaf Razin and Efraim Sadka
Foreign Direct Investment:

Analysis of Aggregate Flows

Princeton University Press, October 2007

The traditional portrayal of international capital flows is hardly

reminiscent of the FDI flows among developed countries, which are much

larger that those from developed to developing countries. Although net ag-

gregate FDI flows from, or to, a developed country is typically small, the

gross flows are quite large. Flows among the developed countries mainly seem to

the ownership of productive assets, moving them to owners who want them

re-shuffle more than their current owners and who are willing to pay the most for them. Presumably,

capital flows move assets from less efficient to more efficient owners, or from owners

who are technologically or commercially backward in their industries to firms that are

technological leaders. In none of these cases do such flows necessarily change the

location of the production, assets, or employment of these industries, though. There arises

a question whether FDI plays any useful economic role except the mere shift of asset

ownership. Similarly, in many cases FDI to developing countries is also merely a

of capital. Savers in a developing country which does not have developed

round-tripping and well- functioning saving and financial intermediation institutions export their capital to a

location which specializes in exporting back FDI to this country (China and Hong Kong

are a notable example). In this case too there arises the same question of whether this

round- tripping of capital, which created no net import of capital, serves any useful

economic role.
17. Assaf Razin, Efraim Sadka, and Ben Suwankiri
Migration and the Welfare State: Political- Economy Based Policy Formation

MIT Press, 2011

"Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The Wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!"
Emma Lazarus, 1883

In the 19th century, these words were so emblematic of the spirit of the free-immigration era in the US that they were engraved in bronze at the base of the Statue of Liberty. These words might not be so popular if they were written today.

Back in 1883, the idea of the welfare state and the threat it would bring to free immigration was still in its embryonic state in Europe and had yet to be brought to the US shores. From one hundred years before to one hundred years after, economists have argued in favor of the free movement of peoples. In 1776, Adam Smith labeled the restriction on immigration as being just as debilitating as a restriction of capital movements. Towards the end of the 20th century, Milton Friedman remarked that free immigration and a welfare state are mutually exclusive. A welfare state with open borders, he argued, might turn into a haven for the poor and needy from all over the world, draining its finances and bringing the welfare system to its knees. Yet whereas free capital mobility is now widespread, free migration is rare indeed.

The Nobel Laureate economist, Milton Friedman, had it right: “It’s just obvious that you can’t have free

immigration and a welfare state.” That is, a generous welfare state would be under constant attack by the

many would be immigrants who yearn for its many benefits. Sooner or later there be formed a political

coalition in the welfare state that will either curtail its generosity or restrict in- migration, or both.

On the other hand, a welfare state, especially an aging welfare state, may welcome young and skilled

migrants. Thus, the attitude of the native- born population towards migration depends on the skill composition

and age distribution of the would- be migrants; and migration policies may be “tailored” for different

categories of potential migrants. Also, within the welfare state there is typically no consensus with respect to

the generosity of the state. How these conflicts are resolved in a [political- economy set up--- this is the

subject matter of the book.
Linda B. Glaser from Conell writes: For economist Assaf Razin, 2015 has proven a defining moment in his career, with the release of two new books representing more than a decade of work. Razin calls it a “consolidation moment,” though both books having a November release date is entirely coincidental.

Understanding Global Crises: An Emerging Paradigm (MIT Press) is based on Razin's graduate lectures that synthesize the differing views of economists. The first chapters give a comprehensive historical account of major financial crises in the last 30 years around the globe, identifying the essential elements to be understood: the currency crisis, the stock market, the banking crisis, the macroeconomic mismanagement that leads to crisis, and the birth and bursting of bubbles.

The subsequent chapters are targeted to graduate students and professionals who can penetrate the analytics Razin applies to these elements of financial crises. In the epilogue he addresses the “emerging paradigm” of the title. “I offer no definite conclusions,” says Razin. “We don't have an overarching framework in economics to understand a crisis of this global proportion.” But, he adds, the very heated exchange over austerity vs. stimulus policies has produced new ideas and new literature.

The second book, co-authored with Efraim Sadka of Tel Aviv University, is based on research the two have been collaborating on for the last 15 years. “Migration State and Welfare State: Why Is America Different from Europe?” (Palgrave-MacMillan Pivot) examines two key policy differences between Europe and the U.S. While both are welfare states without free migration from the rest of the world, the European Union has more generous welfare state provisions, higher taxes and more liberal immigration policies than the U.S. (video)

“There's no free migration because they are welfare states and thus are magnets to immigrants who could burden and undermine the welfare state,” explains Razin. But while both Europe and the U.S. employ restrictions on migrants, 60-70 percent of world migrants who are skilled come to the U.S. In contrast, Europe attracts a majority of unskilled labor.

The key difference, the researchers found, lies in the organization of the U.S. as a federal system of states, with federalized taxation and welfare and migration policies. The EU, in contrast, is a collection of 28 independent states with little coordination of fiscal and migrant policy. The EU's financial fragmentation results in competition between states, which leads to greater welfare-state generosity and less screening migration policy.

Third Generation
Ronny's first published paper
Razin, Ronny (2003) Signaling and election motivations in a voting model with common values and responsive candidates. Econometrica, 71 (4). pp. 1083-1119.

Fourth Generation
Iddo’s Winning Poem, 2010


Polluted air invades his lungs.

Out looms a breeze so soft and clean,

Atop his head grow fields of green,

Like tender sheets shielding the young,

Dwellers roam upon his shores,

Like ants dashing through their holes,

Suddenly the great bell tolls,

To end what the king deplores.

Fruit grows hanging from his veins,

Ripe and sweet and cold as stone,

There he sits on a gold throne,

Ruler of the land he reigns.

All bow down before his might

monarch of this flawless land,

Never did such power stand,

For he supplies his realm with light

So bright it blinds the mortal eye,

The kingdom of Utopia,

Is hidden hope amongst a heartless world.
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