How Much Equity Does the Government Hold?
AbstractA central point in the recent debate about Social Security in the United States has been the extent to which the federal government should take significant positions in the equity market. But, as this paper shows, the government already has a much more significant, if implicit position in the U.S. equity market through its claim to future tax revenues. Using estimates of the sensitivity of federal tax revenues to stock market returns, I calculate the implicit equity position of the federal government, defined as the equity position that would be as sensitive to the stock market as the present value of federal revenues. Although standard errors are large, point estimates indicate that the implicit federal equity position exceeds the size of the stock market itself, a result that is consistent with the fact that revenues from all sources, not just taxes on corporate source income, are responsive to stock market returns.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10291.
Date of creation: Feb 2004
Date of revision:
Publication status: published as Auerbach, Alan J. "How Much Equity Does The Government Hold?," American Economic Review, 2004, v94(2,May), 155-160.
Note: CF PE
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Other versions of this item:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-08 (All new papers)
- NEP-FIN-2004-02-08 (Finance)
- NEP-PBE-2004-02-08 (Public Economics)
- NEP-RMG-2004-02-08 (Risk Management)
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- Lee Redding, 2006. "Social Security Reform and Corporate Governance," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(3), pages 235-246.
- Wilson Au-Yeung & Jason McDonald & Amanda Sayegh, 2006. "Australian Government Balance Sheet Management," NBER Working Papers 12302, National Bureau of Economic Research, Inc.
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