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Trillion Dollar Estimate: Illicit Financial Flows from Developing Countries

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  • Nitsch, Volker

Abstract

Recent estimates suggest that developing countries lose about 1 trillion US dollars each year due to illicit financial flows. This paper reviews the empirical methodology that underlies those estimates. Various critical aspects of the analytical approach are highlighted, focusing in particular on deficiencies in the use of mirror trade statistics to quantify the extent of capital outflows due to trade misinvoicing. Serious issues in the empirical analysis include, among others, arbitrary assumptions, mixed methodologies and skewed sampling. As a result, it is argued that the quantitative results obtained from those exercises have no substantive meaning. The trillion-dollar estimate of illicit financial flows from developing countries, therefore, lacks evidence and is uncorroborated.

Suggested Citation

  • Nitsch, Volker, 2016. "Trillion Dollar Estimate: Illicit Financial Flows from Developing Countries," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 80589, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:80589
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/80589/
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    Cited by:

    1. Paddy Carter & Alex Cobham, 2016. "Are taxes good for your health?," WIDER Working Paper Series wp-2016-171, World Institute for Development Economic Research (UNU-WIDER).
    2. Daniel Dujava & Maria Siranova, 2017. "Getting the Measures of Trade Misinvoicing Right: Bilateral Panel Data Approach," Working Papers wp98, Institute of Economic Research, Slovak Academy of Sciences, revised 20 Dec 2017.
    3. Dujava, Daniel & Siranova, Maria, 2022. "Is it me or you? A deeper insight into profile of misreporting economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 10-25.
    4. Maya Forstater, 2017. "Beneficial openness? Weighing the costs and benefits of financial transparency," CMI Working Papers 3, CMI (Chr. Michelsen Institute), Bergen, Norway.
    5. Paddy Carter & Alex Cobham, 2016. "Are taxes good for your health?," WIDER Working Paper Series 171, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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