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The missing wealth of nations: Are Europe and the U.S. net debtors or net creditors?

  • 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)

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

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Date of creation: Mar 2012
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Handle: RePEc:hal:psewpa:halshs-00565224
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  1. Gian-Maria Milesi-Ferretti & Natalia T. Tamirisa & Francesco Strobbe, 2010. "Bilateral Financial Linkages and Global Imbalances: A Viewon the Eve of the Financial Crisis," IMF Working Papers 10/257, International Monetary Fund.
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