Capital flight and tax havens: Impact on investment and growth in Africa

Abstract

This paper examines the implications of capital flight and tax havens for economic development in African economies. Specifically, it investigates the impact of capital flight on domestic investment and the opportunity costs of capital flight in terms of foregone growth. First, econometric analysis is used to assess the impact of capital flight on domestic investment. Second, a simulation exercise is undertaken to estimate the potential gains in terms of growth that could be derived from investing capital flight domestically. The empirical evidence is used to draw some policy implications.