Exploring Flows to Tax Havens Through Means of a Gravity Model: Evidence from Italy

27 Pages Posted: 10 Mar 2015

Date Written: September 26, 2014

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.

Keywords: offshore financial flows, money laundering, regulation

JEL Classification: K33, G15, F36

Suggested Citation

Cassetta, Alessia and Pauselli, Claudio and Rizzica, Lucia and Tonello, Marco, Exploring Flows to Tax Havens Through Means of a Gravity Model: Evidence from Italy (September 26, 2014). Bank of Italy Occasional Paper No. 236. Available at SSRN: https://ssrn.com/abstract=2575647 or http://dx.doi.org/10.2139/ssrn.2575647

Alessia Cassetta

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Claudio Pauselli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Lucia Rizzica

Bank of Italy ( email )

Via Milano, 64
00184 Rome
Italy

Marco Tonello (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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