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The leading digit distribution of the worldwide Illicit Financial Flows

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  • Tariq Ahmad Mir

Abstract

Benford's law states that in data sets from different phenomena leading digits tend to be distributed logarithmically such that the numbers beginning with smaller digits occur more often than those with larger ones. Particularly, the law is known to hold for different types of financial data. The Illicit Financial Flows (IFFs) exiting the developing countries are frequently discussed as hidden resources which could have been otherwise properly utilized for their development. We investigate here the distribution of the leading digits in the recent data on estimates of IFFs to look for the existence of a pattern as predicted by Benford's law and establish that the frequency of occurrence of the leading digits in these estimates does closely follow the law.

Suggested Citation

  • Tariq Ahmad Mir, 2012. "The leading digit distribution of the worldwide Illicit Financial Flows," Papers 1201.3432, arXiv.org, revised Nov 2012.
    • Handle: RePEc:arx:papers:1201.3432
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    1. Tomasz Michalski & Gilles Stoltz, 2013. "Do Countries Falsify Economic Data Strategically? Some Evidence That They Might," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 591-616, May.
    2. Pietronero, L. & Tosatti, E. & Tosatti, V. & Vespignani, A., 2001. "Explaining the uneven distribution of numbers in nature: the laws of Benford and Zipf," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 293(1), pages 297-304.
    3. Nye John & Moul Charles, 2007. "The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-14, July.
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