CefES Working Papers

Knockin’ on H(e)aven’s door. Financial crises and hidden wealth

by Silvia Marchesi (University of Milan-Bicocca) and Giovanna Marcolongo (Bocconi University)


This paper investigates the link between financial crises in developing countries and variation of bank deposits in offshore financial centers. Using both a two way fixed effects and a stacked difference-in-differences estimator, we find that after three years since the beginning of the crisis bank deposits in tax havens increase by about 20 percent. The effect does not depend on taxation and seems driven by countries with more fragile institutions. We add to the literature on the effects of tax havens: they not only facilitate tax evasion and corruption in “normal times”, but also absorb resources during financial crises, when most needed.