Saving behavior and risk taking: Evidence from the Dutch Tax Reform in 2001

Erik Floor and Arjan Lejour

No 273, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We estimate the impact of the marginal tax rate on the ownership in risk-bearing assets and on the share in total assets. In contrast to the literature, we use instrumental variables to correct for endogeneity of the marginal tax rate on capital income. Moreover, we use the exogenous variation in marginal tax rates from the Dutch tax reform of 2001. We find that a change in the difference in the marginal tax rate between risky assets and riskless assets has a significant positive impact on the ownership of risky assets and growth funds. A ten percentage point increase of the marginal rate results in a 0.5 percentage point increase of the probability of owning risky assets. The tax rate has no impact on the share of risky assets if we correct for endogeneity and selection.

JEL-codes: G11 H24 H31 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-acc, nep-eur, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:273

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