TUMAG · Towards a Unified Macro-Distributional Analysis of Globalization

Which social groups have most benefitted from financial globalization since the 1980s? How would inequality have evolved if, instead of tax competition, countries had chosen tax harmonization? The goal of this project is to address these questions in a unified framework and using new data. This proposal builds on my previous work and consists of two parts. First, I will create prototype Global Flows of Funds: comprehensive statistics of the ownership of global assets by country of the owner and wealth group (e.g., amount of UK real estate owned by US households in the top 1% of the wealth distribution). Current macroeconomic and inequality data do not indicate which groups of the population own external assets in different countries. To remedy this, I will generalize my earlier work on the size and distribution of offshore wealth to all external assets, leveraging recent major improvements in global wealth data. The resulting database will provide a direct measure of the share of foreign assets in the portfolios of different wealth groups (e.g., fraction of the wealth of the US top 1% invested in foreign assets), bridging the gap between the study of inequality and financial globalization. Second, using these Global Flows of Funds, I will estimate the effect of international tax competition on inequality. I will first provide a comprehensive quantification of the rise of international fiscal externalities since the 1980s, i.e., the extent to which residents of a given country have increasingly been subject to taxation in other countries (e.g., tax havens). Using multi-country models of wealth accumulation with heterogeneous agents calibrated using Global Flow of Funds data and other sources, I will then simulate the counterfactual evolution of inequality under different regimes of international tax coordination (e.g., full tax harmonization) since 1980. The ultimate objective is to renew thinking about the future of international economic coordination.