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Market versus Residence Principle: Experimental Evidence on the Effects of a Financial Transaction Tax

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Listed:
  • Jürgen Huber
  • Michael Kirchler
  • Daniel Kleinlercher
  • Matthias Sutter

Abstract

The effects of a financial transaction tax (FTT) are scientifically disputed, as seemingly small details of its implementation may matter a lot. In this article, we provide experimental evidence on the different effects of an FTT, depending on whether it is implemented as a tax on markets, on residents, or a combination of both. We find that a tax on markets has negative effects on volatility and trading volume, whereas a tax on residents shows none of these undesired effects. Additionally, we observe that individual risk attitude is not related to traders’ reaction to the different forms of an FTT.

Suggested Citation

  • Jürgen Huber & Michael Kirchler & Daniel Kleinlercher & Matthias Sutter, 2017. "Market versus Residence Principle: Experimental Evidence on the Effects of a Financial Transaction Tax," Economic Journal, Royal Economic Society, vol. 127(605), pages 610-631, October.
  • Handle: RePEc:wly:econjl:v:127:y:2017:i:605:p:f610-f631
    DOI: 10.1111/ecoj.12339
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