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Biased effects of taxes and subsidies on portfolio choices

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  • Ackermann, Hagen
  • Fochmann, Martin
  • Mihm, Benedikt

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. If we combine both a tax and a subsidy, this effect intensifies.

Suggested Citation

  • Ackermann, Hagen & Fochmann, Martin & Mihm, Benedikt, 2012. "Biased effects of taxes and subsidies on portfolio choices," arqus Discussion Papers in Quantitative Tax Research 138, arqus - Arbeitskreis Quantitative Steuerlehre.
    • Handle: RePEc:zbw:arqudp:138
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    References listed on IDEAS

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    More about this item

    Keywords

    tax perception; risk-taking behavior; portfolio choice; distorting taxation; tax; subsidy; behavioral economics;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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