The gravity of Offshore Financial Centers: Estimating real FDIs using a binary choice model

Marco Albori, Alessio Anzuini, Fabrizio Ferriani and Luca Rossi

International Economics, 2024, vol. 178, issue C

Abstract: Fiscal and regulatory arbitrage opportunities in Offshore Financial Centers (OFCs) materially distort the economic analysis based on cross-border capital flows. However, despite its significance, there is limited information on the true scale of this phenomenon. This paper focuses on Foreign Direct Investments (FDIs) and fills this gap by using an extensive list of FDIs determinants and estimating a gravity-like binary choice specification to assess how much bilateral FDIs are driven by economic integration motives versus profit shifting opportunities. We find that the share of so-called phantom FDIs, after rising in 2010–15, stabilized at around 40% of total FDIs in recent years and that this share is systematically larger in OFCs, reconciling available evidence on the abnormal amount of recorded FDIs in these countries.

Keywords: Foreign direct investments; FDI network; Tax havens; Gravity models (search for similar items in EconPapers)
JEL-codes: C33 F21 F23 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2110701724000246
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The gravity of Offshore Financial Centers: estimating real FDIs using a binary choice model (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:178:y:2024:i:c:s2110701724000246

DOI: 10.1016/j.inteco.2024.100501

Access Statistics for this article

International Economics is currently edited by Valerie Mignon and Marcelo Olarreaga

More articles in International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().