As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Assaf Razin, former Professor at Cornell University, Emeritus Professor at the Eitan Berglas School of Economics at Tel Aviv University, and Research Fellow at the NBER, CEPR, and CESifo.
Abstract: Globalization radically changes income distribution and triggers intense international tax competition. Therefore, globalization entails an extensive restructuring of the welfare state. We analyze a parsimonious model of an open economy, in its trade and finance transactions with the rest of the world, governed by voter-majority-controlled welfare state. We analyze the interactions between taxation, provision of social benefits, and globalization. We demonstrate how these interactions are grounded on trade-related and macro-related fundamentals, familiar from a standard open-economy model:
(i) Degree of trade border frictions, (ii) Degree of international finance frictions, (iii) Relative factor abundance that determines the capital intensity of the country’s exports; and, (iv) Domestic savings and productivity of domestic investment, which determines whether the country is a financial capital exporter or importer.
We address the issues of whether the welfare state enhances (or inhibits) the trade and financial openness driven by diminished border effects; whether globalization chips away at the generosity of the welfare state; and, whether the welfare state efficiently spreads out the gains from globalization from winners to losers.
Assaf Razin is the author of 'Understanding Global Crises: An Emerging Paradigm' and a coauthor of, among other books, 'The Decline of the Welfare State: Demography and Globalization' and 'Migration and the Welfare State: Political-Economy Policy Formation', all published by the MIT Press. He is the recipient of the 2017 EMET Prize in Economics.