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The aim of this paper is to analyze within a simple model how a re- moval of bank secrecy can impact tax revenues and banks' profitability assuming that offshore centers are able to offer sophisticated but legal or not easily detectable tax planning. Two alternative regimes are considered. A first in which there is strict bank secrecy and a second where there is international information exchange for tax purposes. We show in particular that sharing tax information with onshore coun- tries can be a dominant strategy for an OFC if there is enough scope for providing tax planning. Moreover, a partial reduction of tax lia- bilities can already prompt OFCs to voluntarily exchange relevant tax information. We also highlight a surprising result. The possible re- moval of bank secrecy may, under some conditions, reduce the onshore country's tax revenue.

In our paper, we demonstrate that when countries compete in taxes and infrastructure, coordination through a uniform tax rate or a minimum rate does not necessarily create the welfare effects observed under pure tax competition. The divergence is even worse when the competing jurisdictions differ in institutional quality. If tax revenues are used to gauge the desirability of coordination, our model demonstrates that imposing a uniform tax rate is Pareto-inferior to the non-cooperative equilibrium when countries compete in taxes and infrastructure. This result is completely reversed under pure tax competition if the countries are sufficiently similar in size. If a minimum tax rate is set within the range of those resulting from the non-cooperative equilibrium, the low tax country will never be better off. Finally, the paper demonstrates that the potential social welfare gains from tax harmonization crucially depend on the degree of heterogeneity among the competing countries.

In this paper, we analyze the dynamics of a very small economy which tries to attract foreign investments. For that purpose, we model the intertemporal behavior of a small jurisdiction using taxes and attractive public infrastructures as policy instruments, for given policy choices of the rest of the world. Applying Pontryagin's maximum principle, we then characterize the potential steady states which are attainable. These results give some insights into the policy behavior that may guarantee the long run survival of very small economies.

This paper discusses the effects of pressure policies on offshore financial centers as well as their ability to enforce the compliance of those centers with anti-money laundering regulations. Offshore banks can be encouraged to comply with rigorous monitoring of an investor's identity and the origin of his/her funds when pressure creates a sufficiently high risk of reputational harm to the investor. We show that such pressure policies harm both offshore and onshore investors and can benefit both the bank industry and tax administrations. We show that social optimal pressure policies are dichotomous decisions between no pressure at all and a pressure great enough to persuade offshore banks to comply. The delegation of pressure policies to onshore tax institutions may be inefficient. Deeper financial integration fosters compliance by the offshore center.

The financial sector has emerged as the main economic engine over the past two decades. The comparative advantages of placing financial activities in Luxembourg have mostly been in terms of an adaptive legislative and regulatory framework and low taxation. As a result, Luxembourg is today one of the main international centres for investment funds. Besides the sector’s direct and indirect employment effects, the most important effect is the large tax revenue generating capacity of the sector, accounting directly for over 20% of aggregate tax revenues. On the other hand, these tax revenues are volatile as the sector is highly sensitive to developments in international financial markets. Indeed, past downturns in international financial markets have tended to lead to a sharp slowdown of growth in the economy as well as in revenues, pointing to potential large risks associated with the current turmoil in international financial markets. Besides these short-term considerations, a lower trend growth rate of the sector is likely over the medium term. The main activities of the sector are in middle and back offices dealing with financial administration which, with new IT technologies, will tend to be increasingly outsourced. At the same time, the sector is having problems in attracting highly specialised talent to enter higher value front office activities. Over the longer term, international competition will continue to exert pressures that may eventually erode Luxembourg’s position. The extent of the decline in the sector’s trend growth depends on the ability to maintain and expand the attractiveness of investing and working in Luxembourg. Achieving this will depend on being able to adjust tax, infrastructure, and housing policies to attract foreign talent while updating and increasing the transparency of financial sector regulation.

The aim of this paper is to develop a dynamic model of migrations, in which migration is driven by size asymmetries between countries and by the relative preferences of consumers between private consumption and consumption of public goods. The dynamic tra jectories heavily depend on the degree of attractiveness for public goods We show that monotone migrations require sufficiently strong preferences for public goods, and can only be sustained from the small to the large countries. We identify the threshold value of the public goods’ intensity of preferences guaranteeing the survival of the small country. For weaker preference intensities, oscillating migrations may arise, but they finally converge to situation where both countries are of equal size.

Substitution policies are strategies sometimes chosen in Sub-Saharan Africa for curtailing the shortage of health professionals especially caused by the outflow of medical personnel. The aim of our contribution is to propose a way to assess the merits and drawbacks of substitution policies by developing a simple growth model of healthcare productivity with medical brain drain. Within this framework, we use a medical care production function of the CES type which aggregates low and high specialized health workers. We then run simulations which compare scenarios with and without substitution strategies by using data from the Ghana's medical sector.

Since Offshore Financial Centers (OFCs) generally provide bank secrecy to foreign investors they are likely to attract criminal money. Recently however, academic writings have pointed to the fact that OFCs might have beneficial economic effects. In this context, we address the question whether pressure exerted by international organizations on offshore financial centers may be effective enough to enforce compliance with anti-money laundering regulations. Supposing that onshore and offshore banking centers compete with each other, we show that if costs of being lax (in particular, reputation costs) in customer identification are high enough, offshore banks have an incentive to comply credibly and that in spite of the existence of bank secrecy. Furthermore, the likelihood that an offshore bank credibly opts for monitoring foreign deposits increases with the degree of international financial integration and with the tax difference between onshore and offshore centers.

Cet ouvrage développe trois thèmes : 1) identification des spécialisations et avantages potentiels de la Place luxembourgeoise. Ce 1er chapitre présente selon trois approches (investisseurs individuels, clientèle "firme" et institutions financières) les grands avantages à la source des spécialisations de la Place financière luxembourgeoise; 2) attractivité des places bancaires et financières : les enjeux du cadre institutionnel et juridique. Ce 2e chapitre est consacré à une analyse théorique de la concurrence entre les places bancaires et financières pour l'attrait des capitaux; 3) La dynamique d'agglomération du pôle financier luxembourgeois. Ce 3e chapitre traite des forces centripètes et des forces centrifuges qui s'exercent au sein d'une place financière.

This article intends to evaluate and to precise the transmission channels from financial development to non financial activities in the Luxembourg economy. Especially, we isolate the role played by the external effects of the financial sector on the productiviy of the other sectors. Based on the modified Feder’s production functions (1983), we propose a measure of technological spill-overs generated by the proximity of the banking sector. The analysis of spatial externalities allows a better understanding of these effects on the internal growth process.