draining development.pdf - Khazar University

358 Draining Development?The third issue is perhaps the most interesting. One aspect of dealingwith it would involve assessing whether the links vary quantifiably acrossdeveloping countries and whether there are systematic differences accordingto income group or region. Some attention is given to this questionhere. Another aspect, which will remain for future research, is whetherthe strength of the impact of the links differs from country to country,whether, for example, the impact of haven access in undermining governanceis strongest in low-income countries, natural resource countries,countries with presidential systems, South Asian countries, and so on.Two broad sets of competing hypotheses could usefully be examined:first, whether lower-income countries are generally less closely linked toand less affected by havens because their institutions, including their taxsystems, are sufficiently weak that haven structures are not required tofacilitate rent seeking, for example, by reducing tax payments (or avoidingother regulation), and, second, whether lower-income countries aremore closely linked to and affected by havens because they are less ableto respond to the associated challenges.According to a more nuanced and interesting hypothesis, there arecertain groups of (probably developing) countries in the middle of theincome distribution that are the most closely linked to and affected byhavens, while the poorest countries and the developed economies maybe relatively less affected for different reasons (respectively, the simplicityof financial abuse in the former and the capacity of tax authoritiesand the relative political power of the latter).The following subsection discusses data issues in examining bilaterallinks between developing countries and secrecy jurisdictions, while thesubsequent subsection presents initial findings.DataIdeally, to capture the full range of economic links, data would be availableon a bilateral basis on each relevant (trade) flow and (financial)stock, as follows:• Trade in goods. UN Comtrade provides bilateral data, on the basis of adetailed commodity breakdown if necessary, for most countries andfor up to around 30 years. 18 Here, we take data for the period 1995–2008, by Standard International Trade Classification (SITC), revision