Working Paper: CEPR ID: DP7356
Authors: Kristian Rydqvist; Joshua Spizman; Ilya Strebulaev
Abstract: Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effective taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices.
Keywords: bracket creep; capital gains tax; income tax; inflation; pension funds; stock ownership
JEL Codes: G10; G20; H22; H30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax policy (H29) | Household ownership (D10) |
| Tax benefits from tax-free investment returns (H20) | Household ownership (D10) |
| High personal income taxes (H24) | Pension fund ownership (G23) |
| Tax policy (H29) | Financial intermediaries in the stock market (G23) |
| Tax benefits of holding stocks in pension plans (J32) | Household ownership (D10) |