Regional Blocks and Imperial Legacies: Mapping the Global Offshore FDI Network
University of Oxford, School of Geography and the Environment Working Papers in Employment, Work and Finance, No. 13-07
45 Pages Posted: 29 Oct 2013 Last revised: 3 Oct 2014
Date Written: October 28, 2013
While FDI is generally assumed to represent long-term investments within the “real” economy, approximately 30-50% of global FDI is accounted for by networks of offshore shell companies created by corporations and wealthy individuals for tax and other purposes. To date, there has been limited systematic research on the global structure of these networks. Here we address this gap by employing Principal Component Analysis (PCA) to decompose the global bilateral FDI anomaly matrix into its primary constituent sub-networks. We find that the global offshore FDI network is highly globalized, with a centralized “Network Core” of offshore jurisdictions in Northwest Europe and the Caribbean exercising a largely homogeneous influence over economies worldwide. To the extent that the network is internally differentiated, this appears to primarily reflect a historical layering of social and political relationships. We identify four primary offshore FDI sub-networks, bearing the imprint of four key processes and events: European, particularly UK colonialism, the post-WWII hegemonic alliance between the US and Western Europe, the fall of Soviet communism, and the rise of Chinese capitalism.
Keywords: Offshore financial centers, FDI, Principal component analysis, Global financial network, Investment vehicles, Shell companies, BRICs, British Empire
JEL Classification: F23, F65, G15, H26
Suggested Citation: Suggested Citation