Taxation of Labor Income and the Demand For Risky Assets

Douglas Elmendorf and Miles Kimball

No 3904, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The effect of uninsured labor income risk on the joint saving/portfolio composition decision is analyzed using new techniques from the theory of multiple risk-bearing. Applying this analysis, the effect of labor income taxes on the demand for risky securities is considered. It is well known that when private insurance markets are incomplete, the insurance afforded by labor income taxes can reduce overall saving. This paper establishes that - given plausible restrictions on preferences - the insurance afforded by labor income taxes increases the demand for risky securities, even when labor income is statistically independent of the returns to risky securities.

Date: 1991-11
Note: AP PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published as Elmendorf, Douglas W. and Miles S. Kimball. "Taxation Of Labor Income And The Demand For Risky Assets," International Economic Review, 2000, v41(3,Aug), 801-832.

Downloads: (external link)
http://www.nber.org/papers/w3904.pdf (application/pdf)

Related works:
Working Paper: Taxation of Labor Income and the Demand for Risky Assets (2019)
Journal Article: Taxation of Labor Income and the Demand for Risky Assets (2000)
Working Paper: Taxation of labor income and the demand for risky assets (1996)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3904

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3904

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().