Tali Regev Speaks About The Israeli Economy at MDAE

On February 21st, Professor Tali Regev of IDC Herzliya, Israel visited the Academy and delivered two very interesting presentations. Professor Regev specialises in macroeconomics and labour economics and her presentations revolved around these areas.

The Israeli Economy: From government intervention to a market economy

Her first presentation was about Israel’s growth story. She explained the successful transition of the country from a centralised economy to a market based economy. In a region affected by conflict, war and terrorism, Israel stands out as a country with a high GDP per capita. It spends 8 percent of its GDP on defence. But it stands out today for being a knowledge based economy with 55 percent of its GDP comprised of service trade and more than 60 percent of its exports being high-tech.

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Israel began as a socialist economy at its inception in 1948 and its first 25 years were marked by high levels of government interventions and a paternalistic approach to allocation of resources. While Israel experienced a high growth rate of around 10 percent per annum in its first decade, it could not sustain this performance in the 1970s.  Its growth train was slowed down by the Yom Kippur War that triggered high government deficits and stock market crashes. In 1977, the government liberalised the economy by opening up its capital account and moving towards flexible exchange rates. This did not make things better because of pre-existing inflationary pressures. In 1985, the government took up further reforms and cut down government spending and deficit.

Progressive liberalisations by successive governments in the areas of trade, financial markets and exchange rate management alongside the government efforts to reduce its size and to facilitate a competitive market environment have made the Israeli economy what it is today. From being a high deficit country, today it is a net lender to the world. It was even able to resist the 2008 Global Financial Crisis due to pre-emptive efforts of its then central banker, Stanley Fischer. Today, Israel is blessed with human capital and technological progress fuelled by spending on research and development. The recent discovery of natural gas reserves has only added to its existing prosperity.

She concluded her presentation by talking about the challenges that the Israeli economy faces. Stagnant growth rate after the global financial crisis, mounting prices of goods and conflicts in the region are some of these challenges. Inequality and low labour participation of certain communities such as Arab women and ultra-orthodox men are also major policy issues.

How many cents for a dollar? – Women and men in product market

A woman being underpaid in the labour market is a well-known fact. However, little is known about the differences between men and women in product markets. Do men and women behave differently as sellers? Are they treated differently? Professor Regev answered these and many other questions in her second presentation on the work done by her to address this question by looking at EBay, an online marketplace. In her study, she has used 420 best selling products, focussing only on private sellers with limited number of transactions. She found that women get a lesser price and get lesser number of bids compared to men. Women get 80 cents on the dollar relative to men for new products. The gap is lower for used products. Even for a gender neutral product like an Amazon gift card, women get 7 percent less than men. She found that these results persisted even after controlling for other factors such as length of product descriptions and colour of the background.

She also talked about further research that she is undertaking on the topic. Cultural beliefs play a huge role in product markets and buyers associate a product with a gender. For example, a drill is considered masculine and a sewing machine is considered feminine. So what happens when ‘Allison’ sells a drill? Are products sex categorised?  Owners of a product are categorised by buyers as per their perceived levels of warmth and competence.  For example, women are perceived to be high on warmth and low on competence. Similarly, buyers also categorise products as per the perceived levels of warmth and competence associated with a product. Toys for example, are considered low competence-high warmth goods. When there’s any kind of mismatch, there’s a price penalty. So, when men try to sell a high warmth- low competence good, they get paid lesser than women. ‘Allison’ will get paid lesser than her male counterpart ‘Bob’ if she sells a drill. This gender premium associated with different products is the focus of her present research.

Both presentations were followed by question and answer sessions and Professor Regev appreciated the quality of questions posed by the students and the kind of discussion and outcomes that they generated.
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Date/Time
Date(s) - 21/02/2017
4:00 pm

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