Illicit financial flows and developing countries: A review of methods and evidence
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Illicit financial flows and developing countries : A review of methods and evidence. / Brandt, Kasper.
In: Journal of Economic Surveys, Vol. 37, No. 3, 2023, p. 789-820.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Illicit financial flows and developing countries
T2 - A review of methods and evidence
AU - Brandt, Kasper
N1 - Publisher Copyright: © 2022 The Authors. Journal of Economic Surveys published by John Wiley & Sons Ltd.
PY - 2023
Y1 - 2023
N2 - Illicit financial flows (IFFs) constitute a major challenge for development in low-income countries, as domestic resource mobilization is imperative for providing crucial public services. The current paper focuses exclusively on the economic dimension of IFFs, thereby excluding topics as drugs trade, money laundering, and human trafficking. While several methods offer to measure the magnitude of IFFs, each has its benefits and drawbacks. Critically, methods based on the balance of payments identity may capture licit as well as illicit flows, and a method based on macroeconomic trade discrepancies suffers from doubtful assumptions. The most convincing estimate to date demonstrates that individuals hold financial assets worth around 10% of global GDP in tax havens. Evidence further indicates that developing countries are more exposed to individuals and multinational enterprises illicitly transferring money out of the country.
AB - Illicit financial flows (IFFs) constitute a major challenge for development in low-income countries, as domestic resource mobilization is imperative for providing crucial public services. The current paper focuses exclusively on the economic dimension of IFFs, thereby excluding topics as drugs trade, money laundering, and human trafficking. While several methods offer to measure the magnitude of IFFs, each has its benefits and drawbacks. Critically, methods based on the balance of payments identity may capture licit as well as illicit flows, and a method based on macroeconomic trade discrepancies suffers from doubtful assumptions. The most convincing estimate to date demonstrates that individuals hold financial assets worth around 10% of global GDP in tax havens. Evidence further indicates that developing countries are more exposed to individuals and multinational enterprises illicitly transferring money out of the country.
KW - domestic resource mobilization
KW - illicit financial flows
KW - multinational enterprises
KW - profit shifting
KW - tax havens
U2 - 10.1111/joes.12518
DO - 10.1111/joes.12518
M3 - Journal article
AN - SCOPUS:85133909955
VL - 37
SP - 789
EP - 820
JO - Journal of Economic Surveys
JF - Journal of Economic Surveys
SN - 0950-0804
IS - 3
ER -
ID: 346487174