IDEAS home Printed from https://ideas.repec.org/p/luc/wpaper/14-02.html
   My bibliography  Save this paper

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," CREA Discussion Paper Series 14-02, Center for Research in Economic Analysis, University of Luxembourg.
  • Handle: RePEc:luc:wpaper:14-02
    as

    Download full text from publisher

    File URL: http://wwwfr.uni.lu/content/download/73966/926334/file/2014-02_Offshore%20financial%20centers%20and%20bank%20secrecy.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. James R. Hines, 2010. "Treasure Islands," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 103-126, Fall.
    2. Hindriks, Jean & Peralta, Susana & Weber, Shlomo, 2008. "Competing in taxes and investment under fiscal equalization," Journal of Public Economics, Elsevier, vol. 92(12), pages 2392-2402, December.
    3. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, November.
    4. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1027-1056.
    5. Hampton, Mark P. & Christensen, John, 2002. "Offshore Pariahs? Small Island Economies, Tax Havens, and the Re-configuration of Global Finance," World Development, Elsevier, vol. 30(9), pages 1657-1673, September.
    6. Kai Konrad, 2008. "Mobile tax base as a global common," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 395-414, August.
    7. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    8. Zissimos, Ben & Wooders, Myrna, 2008. "Public good differentiation and the intensity of tax competition," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1105-1121, June.
    9. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    10. Pieretti, Patrice & Zanaj, Skerdilajda, 2011. "On tax competition, public goods provision and jurisdictions' size," Journal of International Economics, Elsevier, vol. 84(1), pages 124-130, May.
    11. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
    12. Justman, Moshe & Thisse, Jacques-Francois & van Ypersele, Tanguy, 2002. "Taking the bite out of fiscal competition," Journal of Urban Economics, Elsevier, vol. 52(2), pages 294-315, September.
    13. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, May.
    14. Dharmapala, Dhammika & Hines Jr., James R., 2009. "Which countries become tax havens?," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1058-1068, October.
    15. J. C. Sharman, 2010. "Shopping for Anonymous Shell Companies: An Audit Study of Anonymity and Crime in the International Financial System," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 127-140, Fall.
    16. Jack High (ed.), 2001. "Competition," Books, Edward Elgar Publishing, number 1751.
    17. Hauptmeier, Sebastian & Mittermaier, Ferdinand & Rincke, Johannes, 2012. "Fiscal competition over taxes and public inputs," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 407-419.
    18. Slemrod, Joel & Wilson, John D., 2009. "Tax competition with parasitic tax havens," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1261-1270, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    More about this item

    Keywords

    Offshore financial centers; portfolio investments; institutional infrastructure competition; tax competition.;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:luc:wpaper:14-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisa Ferreira). General contact details of provider: http://edirc.repec.org/data/crcrplu.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.