Mineral Wealth and Offshore Accounts: Evidence from the Panama Papers

This paper studies the effect of mineral price shocks on the probability of offshore incorporations in tax-havens. Since offshore accounts are widely tied to rent-seeking and corruption in the natural resource sector, we use these observed effects to gain insight into patterns of rent-seeking in mineral dependent countries. We construct a novel dataset that combines monthly data on the incorporation of offshore accounts from the Panama Papers with information about a country’s mineral endowments and monthly world mineral prices. Using a fixed-effects linear probability model, we find that that a large price increase has a positive effect on probability of offshore incorporations in subsequent months, in mineral dependent countries. This effect is stronger in countries with weak institutional quality and higher levels of foreign ownership of mines. We deviate from previous work through our focus on the effects of mineral rents rather than petroleum rents and through our introduction of ownership structure as a key variable of importance.