Rational Asymmetric Development: Transfer Mispricing and Sub-Saharan Africa's Extreme Poverty Tragedy

Economics and Political Implications of International Financial Reporting Standards. IGI Global, 2016. 282-302. doi:10.4018/978-1-4666-9876-5.ch014

28 Pages Posted: 22 Mar 2016 Last revised: 23 Mar 2016

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Date Written: August 2015

Abstract

A recent publication by the World Bank on Millennium Development Goals (MDGs) has established that extreme poverty has been decreasing in all regions of the world with the exception of sub-Saharan Africa (SSA), in spite of over two decades of growth resurgence. This chapter explores the role of transfer mispricing in SSA's extreme poverty tragedy. The analytical structure entails: (1) emphasis of rational asymmetric development as the dark side of transfer pricing; (2) linkages between financial reporting, international financial reporting standards (IFRS), transfer pricing and poverty; (3) evidence that the recent growth resurgence in African countries has been driven substantially by resource-rich countries which are experiencing high levels of exclusive growth and extreme poverty; (4) the practice of transfer mispricing by multinationals operating in resource-rich countries of SSA and (5) a Zambian case study of extreme poverty and transfer mispricing schemes by Glencore in the copper industry. While transfer mispricing is contributing to diminishing African growth, available evidence shows that the component of growth that is not captured by transfer mispricing does not trickle down to the poor because the African elite is also animated by practices of rational asymmetric development. Policy implications for the fight against extreme poverty are discussed.

Keywords: Transfer pricing, Asymmetric development, Extreme poverty, SSA

JEL Classification: F20, F50, H20, O11, O55

Suggested Citation

Asongu, Simplice, Rational Asymmetric Development: Transfer Mispricing and Sub-Saharan Africa's Extreme Poverty Tragedy (August 2015). Economics and Political Implications of International Financial Reporting Standards. IGI Global, 2016. 282-302. doi:10.4018/978-1-4666-9876-5.ch014 . Available at SSRN: https://ssrn.com/abstract=2752532 or http://dx.doi.org/10.2139/ssrn.2752532

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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