We analyse whether agreements on information exchange had measurable effects on the economy of tax havens. As GDP data are missing for many small tax haven jurisdictions, we use night light data as a proxy for economic activity. Using this proxy allows us to increase the number of tax haven jurisdictions by up to 25 percent compared to using GDP. We find that tax havens which have signed more tax information exchange agreements experienced a significantly higher economic activity, as proxied by the sum of night light emissions. When we use GDP as a measure of economic activity, tax information exchange agreements are not associated with a differential development of economic activity. Both observations suggest that information exchange treaties so far have not reduced economic growth in more cooperative tax havens.

I investigate the determinants and consequences of the rise of tax havens using a novel database that tracks the creation and development of offshore legal institutions in 48 tax havens. After describing the evolution of tax havens in the 20th century, I explore the causal determinants of their emergence. Building on the idea that tax havens are the suppliers in the market for offshore services, I show that offshore services demand shocks explain why countries become tax havens. I also find that competition shocks explain why tax havens update their regulations. This reaction is facilitated by the diffusion of legal technologies across tax havens. Finally, I show that a country’s becoming a tax haven generates per-capita GDP gains and domsetic sectoral reallocation. In turn, nonhaven countries’ tax structure is affected by the rise of tax havens, resulting in an increased tax burden on labor relative to that on capital.

To understand how global firm networks operate, we need consistent information on their activities, unbiased by their reporting choices. In this paper, we collect a novel dataset on the light that factories emit at night for a large sample of car manufacturing plants. We show that nightlight data can measure activity at such a granular level, using annual firm financial data and high-frequency data related to Covid-19 pandemic production shocks. We use this data to quantify the extent of misreported global operations of these car manufacturing firms and examine differences between sources of nightlight.

Forty percent of the global FDI stock is hosted in tax havens and nearly all of them are concentrated in 6 conduit countries, while their share in the world economy is hardly 4%. These abnormal FDI patterns suggest that FDI and international corporate tax avoidance are closely related. The conduit countries benefit from stringent anti-BEPS polices by high tax countries towards traditional tax havens, such as CFC-policies and withholding taxes on international income flows. Multinational firms can escape these unilateral policies by establishing intermediate holdings in conduit countries without or more lax anti-BEPS polices. The regression analysis shows that the rise in unilateral CFC-policies the last decade has stimulated FDI to conduit countries, and this process slowed down in Europe after the implementation of EU-wide CFC-policies included in the ATAD1-directive.