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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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File URL: http://hdl.handle.net/10.1093/qje/qjt012
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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: a View on The Eve of the Financial Crisis," IMF Working Papers 10/257, International Monetary Fund.
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Cited by:
  1. 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 2013-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  2. Niels Johannesen, 2009. "Tax Evasion and Swiss Bank Deposits," EPRU Working Paper Series 2010-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2010.
  3. 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).
  4. Clausing, Kimberly A., 2013. "Who Pays The Corporate Tax In A Global Economy?," National Tax Journal, National Tax Association, vol. 66(1), pages 151-84, March Cit.
  5. Valeria Pellegrini & Enrico Tosti, 2012. "In search of lost capital: an estimation of undeclared portfolio assets," Questioni di Economia e Finanza (Occasional Papers) 131, Bank of Italy, Economic Research and International Relations Area.
  6. Kohler, Pierre, 2014. "Asset-Centred Redistributive Policies for Sustainable Development," MPRA Paper 55357, University Library of Munich, Germany.
  7. Pierre-Olivier Gourinchas & Hélène Rey, 2013. "External Adjustment, Global Imbalances and Valuation Effects," NBER Working Papers 19240, National Bureau of Economic Research, Inc.
  8. Bridgman, Benjamin, 2014. "Do intangible assets explain high U.S. foreign direct investment returns?," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 159-171.
  9. Philip R. Lane, 2011. "The Dynamics of Ireland?s Net External Position," The Institute for International Integration Studies Discussion Paper Series iiisdp388, IIIS.

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