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The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?

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  • Gabriel Zucman

Abstract

This article shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens. Drawing on a unique Swiss data set and exploiting systematic anomalies in countries' portfolio investment positions, I find that around 8% of the global financial wealth of households is held in tax havens, three-quarters of which goes unrecorded. On the basis of plausible assumptions, accounting for unrecorded assets turns the eurozone, officially the world's second largest net debtor, into a net creditor. It also reduces the U.S. net debt significantly. The results shed new light on global imbalances and challenge the widespread view that after a decade of poor-to-rich capital flows, external assets are now in poor countries and debts in rich countries. I provide concrete proposals to improve international statistics. JEL Codes: F32, H26, H87. Copyright 2013, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 128 (2013)
Issue (Month): 3 ()
Pages: 1321-1364

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Handle: RePEc:oup:qjecon:v:128:y:2013:i:3:p:1321-1364

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  1. Gian-Maria Milesi-Ferretti & Natalia T. Tamirisa & Francesco Strobbe, 2010. "Bilateral Financial Linkages and Global Imbalances," IMF Working Papers, International Monetary Fund 10/257, International Monetary Fund.
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Cited by:
  1. Philip R. Lane, 2011. "The Dynamics of Ireland?s Net External Position," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp388, IIIS.
  2. Valeria Pellegrini & Enrico Tosti, 2012. "In search of lost capital: an estimation of undeclared portfolio assets," Questioni di Economia e Finanza (Occasional Papers), Bank of Italy, Economic Research and International Relations Area 131, Bank of Italy, Economic Research and International Relations Area.
  3. Benjamin Bridgman, 2009. "Do Intangible Assets Explain High U.S. Foreign Direct Investment Returns?," 2009 Meeting Papers, Society for Economic Dynamics 373, Society for Economic Dynamics.
  4. Clausing, Kimberly A., 2013. "Who Pays The Corporate Tax In A Global Economy?," National Tax Journal, National Tax Association, National Tax Association, vol. 66(1), pages 151-84, March.
  5. Jørgen Juel Andersen & Niels Johannesen & David Dreyer Lassen & Elena Paltseva, 2013. "Petro Rents, Political Institutions, and Hidden Wealth: Evidence from Bank Deposits in Tax Havens," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 2013-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  6. Langenmayr, Dominika, 2014. "Voluntary Disclosure of Evaded Taxes - Increasing Revenues, or Increasing Incentives to Evade?," Discussion Papers in Economics, University of Munich, Department of Economics 21359, University of Munich, Department of Economics.
  7. Henrekson, Magnus & Waldenström, Daniel, 2014. "Inheritance Taxation in Sweden, 1885–2004: The Role of Ideology, Family Firms and Tax Avoidance," Working Paper Series, Center for Fiscal Studies, Uppsala University, Department of Economics 2014:9, Uppsala University, Department of Economics.
  8. Heshmati, Almas & Kim, Jungsuk, 2014. "A Survey of the Role of Fiscal Policy in Addressing Income Inequality, Poverty Reduction and Inclusive Growth," IZA Discussion Papers 8119, Institute for the Study of Labor (IZA).
  9. Gourinchas, Pierre-Olivier & Rey, Hélène, 2013. "External Adjustment, Global Imbalances and Valuation Effects," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9566, C.E.P.R. Discussion Papers.
  10. Kohler, Pierre, 2014. "Asset-Centred Redistributive Policies for Sustainable Development," MPRA Paper 55357, University Library of Munich, Germany.
  11. Niels Johannesen, 2009. "Tax Evasion and Swiss Bank Deposits," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 2010-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2010.

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