Assaf Razin

Bio: Assaf Razin is an academic researcher from Tel Aviv University. The author has contributed to research in topics: Welfare state & Population. The author has an hindex of 65, co-authored 439 publications receiving 16335 citations. Previous affiliations of Assaf Razin include Cornell University & National Bureau of Economic Research.

Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption

Abstract: This paper proposes a method for computing tax rates using national accounts and revenue statistics. Using this method we construct time-series of tax rates for large industrial countries. The method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases. This method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework. These tax rates compare favorably with existing estimates of marginal tax rates, and highlight important international differences in tax policy.

The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect

Abstract: The paper examines the effect of terms-of-trade changes on a small country's spending and current account, assuming optimizing behavior in an intertemporal framework with perfect international capital mobility. A temporary (future) terms-of-trade deterioration implies a deterioration (improvement) of the trade balance, whereas a permanent terms-of-trade deterioration has an ambiguous effect, depending on the rate of time preference. Nominal and real variables are considered via exact price indexes. Two periods and an infinite horizon are examined.

Current Account Reversals and Currency Crises; Empirical Regularities

Abstract: This paper studies large reductions in current account deficits and exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. Both domestic factors, such as the low reserves, and external factors, such as unfavorable terms of trade, are found to trigger reversals and currency crises. The two types of events are, however, distinct; an exchange rate crash is associated with a fall in output growth and a recovery thereafter, while for reversals there is no systematic evidence of a growth slowdown.

Current Account Reversals and Currency Crises: Empirical Regularities

Abstract: This paper studies sharp reductions in current account deficits and large exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. It finds that both domestic factors, such as the low reserves, and external factors, such as unfavorable terms of trade and high interest rates in industrial countries, trigger reversals and currency crises. The two types of events are, however, distinct; indeed, current account imbalances are not sharply reduced in the years following a currency crisis. Economic performance around these events is also quite different. An exchange rate crash is associated with a fall in output growth and a recovery thereafter, while for reversal events there is no systematic evidence of a growth slowdown.

Economic Reform and the Process of Global Integration

Abstract: WHEN T H E BROOKINGS Panel on Economic Activity began in 1970, the world economy roughly accorded with the idea of three distinct economic systems: a capitalist first world, a socialist second world, and a developing third world which aimed for a middle way between the first two. The third world was characterized not only by its low levels of per capita GDP, but also by a distinctive economic system that assigned the state sector the predominant role in industrialization, although not the monopoly on industrial ownership as in the socialist economies. The years between 1970 and 1995, and especially the last decade, have witnessed the most remarkable institutional harmonization and economic integration among nations in world history. While economic integration was increasing throughout the 1970s and 1980s, the extent of integration has come sharply into focus only since the collapse of communism in 1989. In 1995 one dominant global economic system is emerging. The common set of institutions is exemplified by the new World Trade Organization (WTO), which was established by agreement of more than 120 economies, with almost all the rest eager to join as rapidly as possible. Part of the new trade agreement involves a codification of basic principles governing trade in goods and services. Similarly, the International Monetary Fund (IMF) now boasts nearly universal membership, with member countries pledged to basic principles of currency convertibility. Most programs of economic reform now underway in the developing world and in the post-communist world have as their strategic aim the

Export Versus FDI with Heterogeneous Firms

Abstract: Multinational sales have grown at high rates over the last two decades, outpacing the remarkable expansion of trade in manufactures. Consequently, the trade literature has sought to incorporate the mode of foreign market access into the “new” trade theory. This literature recognizes that Ž rms can serve foreign buyers through a variety of channels: they can export their products to foreign customers, serve them through foreign subsidiaries, or license foreign Ž rms to produce their products. Our work focuses on the Ž rm’s choice between exports and “horizontal” foreign direct investment (FDI). Horizontal FDI refers to an investment in a foreign production facility that is designed to serve customers in the foreign market. Firms invest abroad when the gains from avoiding trade costs outweigh the costs of maintaining capacity in multiple markets. This is known as the proximity-concentration tradeoff. We introduce heterogeneous Ž rms into a simple multicountry, multisector model, in which Ž rms face a proximity-concentration trade-off. Every Ž rm decides whether to serve a foreign market, and whether to do so through exports or local subsidiary sales. These modes of market access have different relative costs: exporting involves lower Ž xed costs while FDI involves lower variable costs. Our model highlights the important role of within-sector Ž rm productivity differences in explaining the structure of international trade and investment. First, only the most productive Ž rms engage in foreign activities. This result mirrors other Ž ndings on Ž rm heterogeneity and trade; in particular, the results reported in Melitz (2003). Second, of those Ž rms that serve foreign markets, only the most productive engage in FDI. Third, FDI sales relative to exports are larger in sectors with more Ž rm heterogeneity. Using U.S. exports and afŽ liate sales data that cover 52 manufacturing sectors and 38 countries, we show that cross-sectoral differences in Ž rm heterogeneity predict the composition of trade and investment in the manner suggested by our model. We construct several measures of Ž rm heterogeneity, using different data sources, and show that our results are robust across all these measures. In addition, we conŽ rm the predictions of the proximityconcentration trade-off. That is, Ž rms tend to substitute FDI sales for exports when transport * Helpman: Department of Economics, Harvard University, Cambridge, MA 02138, Tel Aviv University, and CIAR (e-mail: ehelpman@harvard.edu); Melitz: Department of Economics, Harvard University, Cambridge, MA 02138, National Bureau of Economic Research, and Centre for Economic Policy Research (e-mail: mmelitz@ harvard.edu); Yeaple: Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19104, and National Bureau of Economic Research (e-mail: snyeapl2@ssc.upenn.edu). The statistical analysis of Ž rmlevel data on U.S. Multinational Corporations reported in this study was conducted at the International Investment Division, U.S. Bureau of Economic Analysis, under an arrangement that maintained legal conŽ dentiality requirements. Views expressed are those of the authors and do not necessarily re ect those of the Bureau of Economic Analysis. Elhanan Helpman thanks the NSF for Ž nancial support. We also thank Daron Acemoglu, Roberto Rigobon, Yona Rubinstein, and Dani Tsiddon for comments on an earlier draft, and Man-Keung Tang for excellent research assistance. 1 See Wilfred J. Ethier (1986), Ignatius Horstmann and James R. Markusen (1987), and Ethier and Markusen (1996) for models that incorporate the licensing alternative. We therefore exclude “vertical” motives for FDI that involve fragmentation of production across countries. See Helpman (1984, 1985), Markusen (2002, Ch. 9), and Gordon H. Hanson et al. (2002) for treatments of this form of FDI. 3 See, for example, Horstmann and Markusen (1992), S. Lael Brainard (1993), and Markusen and Anthony J. Venables (2000). 4 See also Andrew B. Bernard et al. (2003) for an alternative theoretical model and Yeaple (2003a) for a model based on worker-skill heterogeneity. James R. Tybout (2003) surveys the recent micro-level evidence on trade that has motivated these theoretical models. 5 This result is loosely connected to the documented empirical pattern that foreign-owned afŽ liates are more productive than domestically owned producers. See Mark E. Doms and J. Bradford Jensen (1998) for the United States and Sourafel Girma et al. (2002) for the United Kingdom.

Economic growth and income inequality

Abstract: We investigate whether income inequality affects subsequent growth in a cross-country sample for 1965-90, using the models of Barro (1997), Bleaney and Nishiyama (2002) and Sachs and Warner (1997), with negative results. We then investigate the evolution of income inequality over the same period and its correlation with growth. The dominating feature is inequality convergence across countries. This convergence has been significantly faster amongst developed countries. Growth does not appear to influence the evolution of inequality over time. Outline

The nature of theory in information systems

Abstract: The aim of this research essay is to examine the structural nature of theory in Information Systems. Despite the importance of theory, questions relating to its form and structure are neglected in comparison with questions relating to epistemology. The essay addresses issues of causality, explanation, prediction, and generalization that underlie an understanding of theory. A taxonomy is proposed that classifies information systems theories with respect to the manner in which four central goals are addressed: analysis, explanation, prediction, and prescription. Five interrelated types of theory are distinguished: (1) theory for analyzing, (2) theory for explaining, (3) theory for predicting, (4) theory for explaining and predicting, and (5) theory for design and action. Examples illustrate the nature of each theory type. The applicability of the taxonomy is demonstrated by classifying a sample of journal articles. The paper contributes by showing that multiple views of theory exist and by exposing the assumptions underlying different viewpoints. In addition, it is suggested that the type of theory under development can influence the choice of an epistemological approach. Support is given for the legitimacy and value of each theory type. The building of integrated bodies of theory that encompass all theory types is advocated.