Biased effects of taxes and subsidies on portfolio choices

Hagen Ackermann, Martin Fochmann and Benedikt Mihm

Economics Letters, 2013, vol. 120, issue 1, 23-26

Abstract: We study how taxes and subsidies affect portfolio choices in a laboratory experiment. We find highly significant differences after intervention, even though the net income is identical in all our treatments and thus the decision pattern of investors should be constant. In particular, we observe that the willingness to invest in the risky asset decreases markedly when an income tax has to be paid or when a subsidy is paid. We investigate this result further in a range of variations of the baseline experiment and find our main result to be largely robust. However, as we reduce the number of states of nature the bias weakens considerably.

Keywords: Tax perception; Risk-taking behavior; Portfolio choice; Distorting taxation; Behavioral economics (search for similar items in EconPapers)
JEL-codes: C91 D14 H24 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:1:p:23-26

DOI: 10.1016/j.econlet.2013.03.038

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