The elusive banker. Using hurricanes to uncover (non-) activity in offshore financial centers
Job Market Paper, download pdf here.
A number of small islands in the Caribbean and the Pacific are accumulating billions of dollars in international capital. Are these positions attracted by specialized human capital and innovative financial services, as such Offshore Financial Centers (OFCs) claim? Or are they the result of regulatory arbitrage as some economists assume, pointing to financial stability and effective taxation concerns? Based on several novel data sources, this study exploits the natural experiment of re-occurring hurricanes to test for reactions in financial service activity of OFCs. I find that local activity, captured by geospatial satellite data on nightlight intensity, decreases by 30-50% for at least 6 months. However, in OFCs neither the interbank market nor international investors react, while non-OFC islands do show strong negative reactions. Only local company incorporations decline in OFCs after hurricanes hit and this activity can be linked to financial hubs such as London. These results suggests that the high-powered financial service activities leading to the large international capital positions of OFCs take place elsewhere and that OFCs do not create value by providing human capital or financial services locally.
Econometric Society - European Winter Meeting: Naples
Invited expert: Joint Research Center of the European Commission, Seville
PhD Workshop: Max Planck Institute for Tax Law and Public Finance, Munich
Centre for Business Taxation Doctoral Meeting: Sa\“id Business School, University of Oxford
17th Workshop on Public Economics: WZB, Berlin
BERA Workshop on Applied Economics: Hertie School of Governance
VfS conference (German Economic Association): University of Freiburg
CEBI Seminar: University of Copenhagen
Cluster Seminar on Public Finance: DIW Berlin
Tax evasion in new disguise? Examining tax havens’ international bank deposits (with Lukas Menkhoff)
2nd revise and resubmit: Journal of Public Economics, download pdf here.
Bank deposits in tax havens potentially hide illegal tax evasion. The October 2016 release of bilateral locational banking statistics permits us to illuminate three open issues in this respect. We find that the intended effect of additional information-exchange-on-request treaties vanishes since about 2010. This also holds for bank deposits from tax havens in non-havens. In contrast, new treaties based on the automatic exchange of information show bite. This suggests that tax evasion changes its disguise: it adapts to established information exchange treaties while tax evaders seem (partly) surprised by, and thus react to, new treaty forms.
EEA conference: University of Cologne
Invited session IIPF Annual conference: University of Tampere
GIGA Seminar in Socio-Economics: German Institute of Global and Area Studies, Hamburg
Economics Colloquium: University of Hannover
VfS conference (German Economic Association): University of Vienna
5th Shadow Economy conference: University of Warsaw
DIW graduate center workshop
15th INFINITI conference: University of Valencia
DIW graduate center workshop, Potsdam
The needle in the haystack: What drives labor and product market reforms in advanced countries? (with Romain Duval and Davide Furceri)
revise and resubmit: Journal of Applied Econometrics, download pdf here.
IMF working paper No. 101
The political economy literature has put forward a multitude of hypotheses regarding the drivers of structural reforms, but few, if any, empirically robust findings have emerged thus far. To make progress, we draw a parallel with model uncertainty in the growth literature and provide a new version of the Bayesian averaging of maximum likelihood estimates (BAMLE) technique tailored to binary logit models. Relying on a new database of major past labor and product market reforms in advanced countries, we test a large set of variables for robust correlation with reform in each area. We find widespread support for the crisis-induces-reform hypothesis. Outside pressure increases the likelihood of reform in certain areas: reforms are more likely when other countries also undertake them and when there is formal pressure to implement them. Other robust correlates are more specific to certain areas — for example, international pressure and political factors are most relevant for product market and job protection reforms, respectively.
Workshop on Structural Reforms and European Integration: LSE
Summer School Econometrics of Panel Data and Network Analysis: Humboldt University Berlin (Poster)
IMF jobs and growth Seminar: International Monetary Fund
Germany’s Efforts to Curb International Tax Evasion (with Hannes Fauser)
preliminary version available on request
We evaluate the impact of regulatory attempts by German authorities to combat international tax evasion. Monthly cross-border deposits from tax havens in German banks show a 32-34% reduction in reaction to bilateral information exchange. These findings are comparable in magnitude to a number of reference studies which confirms Germany as a valid case study for international tax evasion. We show disaggregated reactions for a list of tax havens and find large reactions to information exchange for Guernsey, the Bahamas, and Jersey. We then employ a manually constructed narrative databases collecting changes in the German tax code and information leaks from tax havens. Tax evaders do not react to changes in tax rates and leaks show consistent signs but are rarely significant. These results confirm information exchange as the main focus in the analysis of international tax evasion.
IIPF annual conference: University of Tampere
16th Workshop on Public Economics: WZB, Berlin