Hurricanes, nightlights and the elusive comparative advantage of offshore finance
A number of small offshore jurisdictions exhibit disproportionally large international capital positions. According to governments of these jurisdictions, such positions are (a) the result of a comparative advantage in providing financial services internationally and (b) improve welfare in these jurisdictions. I use the natural experiment of re-occuring hurricanes to test if (a) the capital positions in these jurisdictions react in line with real economic activity on the island as measured by satellite data on nightlights and (b) if such jurisdictions have an advantage in providing a public good (hurricane resilience) when compared to similar jurisdictions not engaged in offshore finance. Preliminary results suggest that hurricanes have a significant impact on local economic activity but not on capital positions. This suggests that the activities leading to such positions take place elsewhere and are not due to a local 'comparative advantage'. Preliminary evidence on public good provision is mixed suggesting some dissemination of funds acquired through offshore finance activities.
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Jakob Miethejmiethe@diw.de+49 30 89789 439
Stefan Etgetonsetgeton@diw.de+49 30 89789 369
Aline Zuccoazucco@diw.de+49 30 89789 383