Hidden Inequality: How Much Difference Would Adjustment for Illicit Financial Flows Make to National Income Distributions?

Alex Cobham, Davis William, Ibrahim Gamal and Sumner Andy ()
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Davis William: UN Economic Commission for Africa, Addis Ababa, Ethiopia
Ibrahim Gamal: UN Economic Commission for Africa, Addis Ababa, Ethiopia
Sumner Andy: King’s College London, London, United Kingdom

Journal of Globalization and Development, 2016, vol. 7, issue 2, 18

Abstract: A recent innovation in measuring inequality is the incorporation of adjustments to top incomes using data from tax authorities, revealing higher inequality. The thesis of this paper is that the incorporation of estimates of income from illicit financial flows (IFF), reflecting untaxed capital, may be as significant to national inequality – but with greater variation across countries. We propose a method of adjusting national inequality data for illicit flows, and present preliminary results. These estimates suggest that untaxed illicit flows could be as important as (taxed) top incomes to estimates of inequality – highlighting the importance of improving estimates of underlying illicit flows.

Keywords: illicit financial flows; income distribution; income inequality; tax (search for similar items in EconPapers)
JEL-codes: D31 H26 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/jgd-2016-0022

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