The Unassuming Economist

From a paper by Glen Biglaiser , Ibrahim Kocaman , Sebastian M Saiegh , and Ronald McGauvran:

“The association between tax havens and income distribution in home states of multinational corporations has attracted much attention. However, studies have not empirically investigated whether there is also a relationship between low-tax jurisdictions and income inequality in host countries. Our findings, based on data from 152 countries spanning 1972–2020 and a range of econometric strategies, reveal a robust positive relationship between tax haven status and domestic income inequality, with tax havens associated with higher market-income (i.e. pretax and pretransfer) Gini indexes, and estimated postadoption Gini coefficients being larger by an average of 0.54 compared to what would be expected based on global trends, country characteristics, and observable economic factors. We also observe that compensatory tax policies, as well as the type of economic activities attracted by tax havens and their implications for labor markets, seem to mediate this relationship. Our results suggest that low-tax jurisdictions economically harm lower income groups in host countries.”