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Exploring flows to tax havens through means of a gravity model: evidence from Italy

Author

Listed:
  • Alessia Cassetta

    (Bank of Italy)

  • Claudio Pauselli

    (Bank of Italy)

  • Lucia Rizzica

    (Bank of Italy)

  • Marco Tonello

    (Bank of Italy)

Abstract

We exploit a gravity model to study the main determinants of cross-border financial flows and to identify those flows that appear to be abnormally above the predicted value. Our data include all Italian cross-border bank transfers that took place between 2007 and 2010. We find that, other things being equal, financial flows to risky destinations are 36 per cent larger than in other countries. Using the residuals from our main econometric specification, we then construct an index of anomaly and find positive and statistically significant correlations between this and the rate of property and drugs-related crimes in the province of origin, and also between the index and other measures of foreign jurisdictions� riskiness and opacity of legislation.

Suggested Citation

  • Alessia Cassetta & Claudio Pauselli & Lucia Rizzica & Marco Tonello, 2014. "Exploring flows to tax havens through means of a gravity model: evidence from Italy," Questioni di Economia e Finanza (Occasional Papers) 236, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_236_14
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2014-0236/QEF-236.pdf
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    References listed on IDEAS

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    Cited by:

    1. Emma Galli & Ilde Rizzo & Carla Scaglioni, 2020. "Is transparency spatially determined? An empirical test for Italian municipalities," Applied Economics, Taylor & Francis Journals, vol. 52(58), pages 6372-6385, December.
    2. Gullo, Valentina & Montalbano, Pierluigi, 2022. "Financial transparency and anomalous portfolio investment flows: A gravity analysis," Journal of International Money and Finance, Elsevier, vol. 128(C).
    3. Valentina Gullo & Pierluigi Montalbano, 2018. "Where does “dirty” money go? A gravity analysis," Working Papers 5/18, Sapienza University of Rome, DISS.

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    More about this item

    Keywords

    offshore financial flows; money laundering; regulation;
    All these keywords.

    JEL classification:

    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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