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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

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

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    Abstract

    This paper 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 systematic anomalies in portfolio investment positions and a unique Swiss dataset, I find that 8% of the global financial wealth of households is held in tax havens, 6% 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 investment statistics.

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    File URL: http://halshs.archives-ouvertes.fr/docs/00/74/86/46/PDF/wp201107.pdf
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    Bibliographic Info

    Paper provided by HAL in its series Working Papers with number halshs-00565224.

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    Date of creation: Mar 2012
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    Handle: RePEc:hal:wpaper:halshs-00565224

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00565224
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    Related research

    Keywords: Tax havens ; International investment positions ; Global imbalances;

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    References

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    1. Philip Lane & Gian Maria Milesi-Ferretti, 2005. "International Investment Patterns," The Institute for International Integration Studies Discussion Paper Series iiisdp024, IIIS.
    2. Mark Aguiar & Manuel Amador, 2010. "Growth in the Shadow of Expropriation," 2010 Meeting Papers 1194, Society for Economic Dynamics.
    3. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc.
    4. Gravelle, Jane G., 2009. "Tax Havens: International Tax Avoidance and Evasion," National Tax Journal, National Tax Association, vol. 62(4), pages 727-53, December .
    5. James B. Davies & Susanna Sandström & Anthony B. Shorrocks & Edward N. Wolff, 2009. "The Level and Distribution of Global Household Wealth," NBER Working Papers 15508, National Bureau of Economic Research, Inc.
    6. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2010. "Financial Stability, the Trilemma, and International Reserves," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 57-94, April.
    7. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc.
    8. Caballero, Ricardo & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2006. "An Equilibrium Model of 'Global Imbalances' and Low Interest Rates," CEPR Discussion Papers 5573, C.E.P.R. Discussion Papers.
    9. Roine, Jesper & Waldenström, Daniel, 2007. "Wealth Concentration over the Path of Development: Sweden 1873–2005," Working Paper Series in Economics and Finance 677, Stockholm School of Economics.
    10. Stephanie E. Curcuru & Tomas Dvorak & Francis E. Warnock, 2008. "Cross-Border Returns Differentials," NBER Working Papers 13768, National Bureau of Economic Research, Inc.
    11. Niels Johannesen & Gabriel Zucman, 2012. "The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown," Working Papers halshs-00665054, HAL.
    12. Guonan Ma & Zhou Haiwen, 2009. "China’s evolving external wealth and rising creditor position," BIS Working Papers 286, Bank for International Settlements.
    13. Song, Zheng Michael & Storesletten, Kjetil & Zilibotti, Fabrizio, 2009. "Growing like China," CEPR Discussion Papers 7149, C.E.P.R. Discussion Papers.
    14. Niels Johannesen & Gabriel Zucman, 2012. "The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown," PSE Working Papers halshs-00665054, HAL.
    15. Fisman, Raymond & Wei, Shang-Jin, 2001. "Tax Rates and Tax Evasion: Evidence from 'Missing Imports' in China," CEPR Discussion Papers 3089, C.E.P.R. Discussion Papers.
    16. 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.
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    Cited by:
    1. 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.

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