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.
Public Economics Seminar: Ludwig-Maximilians-University, Munich
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
Both the data and the code for this paper have been made available together with its publication here.
Robust political economy correlates of major product and labor market reforms in advanced economies: Evidence from BAMLE for Logit Models
with Romain Duval and Davide Furceri
Journal of Applied Econometrics, 2020, link here.
WP version: 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
The data and a readme for this paper has been made available together with its publication here. I’m in the process of publishing R code on the model averaging routine that will allow you to replicate the paper and more.
The elusive banker. Using hurricanes to uncover (non-) activity in offshore financial centers
WP version: CESifo Working Paper No. 8625
This paper studies financial service provision booked through offshore financial centers (OFCs). Based on several novel data sources and recent advances in event study methodology, I exploit the natural experiment of re-occurring hurricanes hitting small islands and compare local reactions to reactions in financial service activity. I find that local conditions, captured by monthly satellite data on nightlight intensity, deteriorate significantly for nine months. However, in OFCs, the international bank sector does not react. Non-OFC islands on the other hand do show strong negative reactions. Similar (non-)reactions are visible in equity prices. Additionally, a link of OFC service provision to activity in London, Tokyo, and New York is visible in leaked data. Finally, a long term relationship between offshore finance and local development is absent, but only on OFCs. These results indicate that international regulation attempts that aim at forcing OCFs to provide information on financial service activity could be targeted better, they show that we mis-allocate financial risk to OFCs, and they cast doubt on offshore finance as a valid development strategy.
Invited Seminar: German Minsitry of Finance
Invited Seminar: University St. Gallen (invited by Christian Keuschnigg)
113th annual NTA conference
Invited Presentation: IFF Network (invited by Niels Johannesen)
IIPF annual conference: University of Iceland, Reykjavik
ASSA Annual Meeting: San Diego
Winter School on Inequality and Social Welfare Theory: Alba di Canazei
MaTax - Sixth Annual Conference, ZEW Mannheim
Econometric Society - European Winter Meeting, Naples
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 Finance: WZB, Berlin
Brown Bag Seminar Macroeconomics: Humboldt University 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
Assuming that not everyone cares about small islands as much as I do, Mark Toth and me wrote an R package based on the code of this paper that allows you to build plots and moonthly or yearly time series of nightlight intensity for (almost) any geospatial unit on the planet. Find it on github.
Work in Progress
Offshore real estate investment. Economic incentives, secrecy motives, and ultimate ownership
with Daniel Weishaar
More than 90% of commercially owned foreign real estate in England is held through secrecy jurisdictions. This study combines high quality administrative land register data with leak data on foreign ownership to establish new facts about the motives and ultimate owners behind these investments. In a first step, we exploit tax policy changes and transparency shocks and show that both tax avoidance and secrecy are important motives of foreign real estate investors. By tracking the final investment of an international investor, namely the real estate asset, we can show how asset flows between different foreign countries react. In a second step, we link these data to leaked corporate records. This allows us to trace ownership, usually hidden by corporate structures in secrecy jurisdictions, from the land plot through to the ultimate beneficiary. Results indicate that a significant share of ultimate beneficiaries are UK citizens. The study thus furthers our understanding of international capital flows and has implications for evaluating price developments in real estate markets.
Invited Seminar: University Halle (invited by Lena Tonzer)
Invited Seminar: University Eichstaett-Ingolstadt (invited by Dominika Langemayr)
LMU junior faculty retreat: University of Munich, LMU
IIPF annual conference: University of Iceland, Reykjavik (presented by coauthor)
LMU Junior Faculty Retreat: University of Munich, LMU
Multinationals and international intra-firm insurance
with Sarah Clifford
This paper investigates whether the existence of an internal capital market increases resilience of multinational affiliates during economic downturns. Does the international reach of the multinational firm create more flexible access to credit, particularly in times of credit shortage, and does this affect performance throughout a crisis? We combine multiple sources of entity level panel data and compare the borrowing and lending patterns of affiliates of multinational enterprises to the patterns of comparable domestic firms at the onset of a financial crisis. We first document large differences in the financing patterns of multinational affiliates and domestic entities in response to the global financial crisis of 2008. Evidence suggests that multinationals directed credit towards the headquarter in response to this crisis, causing a large drop in credit of foreign affiliates relative to comparable domestic entities. Interestingly, we do not find these patterns when looking at national crises, suggesting that the flexibility of the internal capital market allows multinationals to react differently to global versus national crises.
CES Public Economics Seminar: LMU Munich
CBT Brown Bag: University of Oxford (presented by coauthor)
Internal banks of multinational enterprises in tax havens
with Sarah Clifford, mimeo
Germany’s Efforts to Curb International Tax Evasion
with Hannes Fauser
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
Making the invisible visible. An empirical assessment of the Eurodollar and its consequences
with Andrea Binder
The repressed recovery from the 2008/2009 Financial Crisis has highlighted significant frictions in the US-dollar based international monetary system. Researchers argue that one reason for this predicament is the Eurodollar, i.e. money creation outside national regulation. Yet, empirical evidence on the Eurodollar system is scant as available statistical data does not distinguish between US dollar and the Eurodollar. This paper asks about the role of the Eurodollar in the international monetary order, both in size and in substance. Building on a conceptual analysis of the distinct nature of the two currencies the paper proceeds in three steps: First, we construct a global estimate of the volume of the offshore created Eurodollar and compare it to the onshore created US dollar. This is possible via a combination of national currency breakdowns and bilateral exposures to offshore financial centres available in the BIS banking data. Second, we assess the effect that the existence and size of the Eurodollar system has on US monetary policy. Finally, we discuss what the findings mean for the nature and governance of the contemporary international monetary system.
ISA annual convention: Toronto