nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒01‒23
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Will We Ever Be Able to Track Offshore Wealth? Evidence from the Offshore Real Estate Market in the UK By Jeanne Bomare; Ségal Le Guern Herry
  2. Homes Incorporated: Offshore Ownership of Real Estate in the U.K. By Niels Johannesen; Jakob Miethe; Daniel Weishaar
  3. A tax evasion experiment revisited By Andersson, Jonas
  4. The Gendered Crisis: Livelihoods and Mental Well-Being in India during COVID-19 By Afridi, Farzana; Dhillon, Amrita; Roy, Sanchari

  1. By: Jeanne Bomare (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Ségal Le Guern Herry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper provides evidence of the growing importance of real estate assets in offshore portfolios. We study the implementation of the first multilateral automatic exchange of information norm, the Common Reporting Standard (CRS), which introduces cross-border reporting requirements for financial assets but not for real estate assets. Exploiting administrative data on property purchases made by foreign companies in the UK, we show that the implementation of the CRS led to a significant increase of real estate investments from companies incorporated in the tax havens that were the most exposed to the policy. We confirm that this increase comes from company owners of countries committing to the new standard by identifying the residence country of a sub-sample of buyers using the Panama Papers and other leaked datasets. We estimate that between £16 and £19 billion have been invested in the UK real estate market between 2013 and 2016 in reaction to the CRS, suggesting that at the global scale between 24% and 27% of the money that fled tax havens following this policy were ultimately invested in properties.
    Date: 2022–06–05
  2. By: Niels Johannesen; Jakob Miethe; Daniel Weishaar
    Abstract: Ownership of real estate through corporations in offshore tax havens creates opportunities for tax evasion and money laundering and may have undesirable effects in housing markets. In this paper, we study offshore ownership of real estate in the United Kingdom by combining several data sources: administrative data from the land register, a comprehensive transaction database, a propriety database on corporate ownership links, and a handful of offshore data leaks. Our descriptive analysis shows that the market share of offshore corporations has increased over time and varies strongly across market segments: It currently stands at 1.25% in the overall residential market and around 15% for top-end properties. When data leaks allow us to trace ownership through offshore corporations to the beneficial owners, we find that around half have ties to Africa, Asia and the Middle East, but that the largest ’foreign’ investor is the United Kingdom itself. Turning to causal evidence, we show that changes in tax incentives and ownership transparency induce strong responses in patterns of offshore ownership, suggesting that both taxation and secrecy are important motives for the beneficial owners. Finally, we show that the Brexit referendum was followed by a sharp increase in property sales by offshore owners and a large differential decrease in property prices in local areas with more offshore ownership, conditional on area and property characteristics. This suggests that the reduction in demand from offshore investors triggered by Brexit had a negative causal effect on property prices and, more broadly, that offshore ownership can have significant real effects in housing markets.
    Keywords: tax havens, tax evasion, offshore financial centers, real estate, hidden wealth
    JEL: H26 F21 R31
    Date: 2022
  3. By: Andersson, Jonas (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: In this paper the experimental data collected by Masclet, Montmarquette, and Viennot-Briot (2019a) is revisited in order to study some aspects of the drivers of the declaration rate, not studied in the authors’ article. By using a zero-one inflated beta regression model, a more detailed analysis of the special values, zero declaration and full declaration, is enabled. It turns out that some of the drivers of the declaration rate is affecting the three parts of the declaration rate distribution, the zero declarers, the full declarers and the intermediate declarers, differently. It is found that the effect of tax payers’ monitoring, i.e., their knowledge about other tax payers’ evasion, increases the probability to declare zero. Among the individuals declaring a part of their income, the effect is significantly positive; they declare more. Another result is that, for the average experiment participant, both the probability to fully declare or declare nothing of the income is increasing as the experiment progresses.
    Keywords: Tax evasion; Zero-one inflated beta regression; experimental data
    JEL: C46 C50 H26
    Date: 2022–12–30
  4. By: Afridi, Farzana (Indian Statistical Institute); Dhillon, Amrita (King's College London); Roy, Sanchari (King's College London)
    Abstract: This paper studies the impact of the COVID-19 pandemic on the gendered dimensions of employment and mental health among urban informal-sector workers in India. First, we find that men's employment declined by 84 percentage points during pandemic relative to pre-pandemic employment, while their monthly earnings fell by 89 per cent relative to the baseline mean. In contrast, women did not experience any significant impact on employment during pandemic, as reported by their husbands. Second, we document very high levels of pandemic-induced mental stress, with wives reporting greater stress than husbands. Third, this gendered pattern in pandemic-induced mental stress is partly explained by men's employment losses, which affected wives more than husbands. In contrast, women staying employed during the pandemic is associated with worse mental health for them and their (unemployed) husbands. Fourth, pre-existing social networks are associated with higher mental stress for women relative to men, possibly due to the 'home-based' nature of women's networks.
    Keywords: COVID-19, wage employment, mental health, social networks, gender, India
    JEL: J16 J22 J23
    Date: 2022–12

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