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Offshore financial centers and bank secrecy

Author

Listed:
  • Patrice Pieretti

    (CREA, Université de Luxembourg)

  • Jacques-François Thisse

    (Université catholique de Louvain)

  • Skerdilajda Zanaj

    (CREA, Université du Luxembourg)

Abstract

We study the impact of an offshore financial center on the economy in the presence or absence of bank secrecy in a two-country setting with heterogeneous investors who choose where to deposit their savings. Rather than focussing on tax competition, we acknowledge that countries use two instruments to attract investors: tax rate and institu- tional infrastructure. Owing to its ability to quickly redesign its regulation environment, the small country has a comparative advantage in providing high-quality institutional in- frastructure. We show that the presence of an offshore financial center fosters competition in institutional infrastructure, which is beneficial with or without bank secrecy.

Suggested Citation

  • Patrice Pieretti & Jacques-François Thisse & Skerdilajda Zanaj, 2014. "Offshore financial centers and bank secrecy," DEM Discussion Paper Series 14-02, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:14-02
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    References listed on IDEAS

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    Cited by:

    1. Konrad, Kai A. & Stolper, Tim B.M., 2016. "Coordination and the fight against tax havens," Journal of International Economics, Elsevier, vol. 103(C), pages 96-107.

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    More about this item

    Keywords

    Offshore financial centers; portfolio investments; institutional infrastructure competition; tax competition.;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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