Offshore financial centers and bank secrecy

Patrice Pieretti, Jacques Thisse and Skerdilajda Zanaj

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We study the impact of an offshore financial center on the economy in the presence or absence of bank secrecy in a two-country setting with heterogeneous investors who choose where to deposit their savings. Rather than focussing on tax competition, we acknowledge that countries use two instruments to attract investors: tax rate and institu- tional infrastructure. Owing to its ability to quickly redesign its regulation environment, the small country has a comparative advantage in providing high-quality institutional in- frastructure. We show that the presence of an offshore financial center fosters competition in institutional infrastructure, which is beneficial with or without bank secrecy.

Keywords: Offshore financial centers; portfolio investments; institutional infrastructure competition; tax competition. (search for similar items in EconPapers)
JEL-codes: G20 H40 H54 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-acc and nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:14-02

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