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The mutual impact of deferral labour taxation and capital income taxation on risk-taking behaviour: An experimental analysis

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  • Massarrat-Mashhadi, Nima

Abstract

Does the timing of labour earnings taxation encroaches upon capital income taxation and individual risk-taking investment decisions, i.e. portfolio selection? This paper presents the results of a laboratory experiment that is, contrary to previous approaches, not restricted to the analysis of capital income taxation (fully taxable vs. tax-exempt investment earnings) and individual risktaking, but adds other dimensions of taxation, i.e. deferral or immediate labour earnings taxation. Empirical findings support the view that tax framing effects affect tax burden visibility, changing individuals' risk-taking propensity substantially. A tax system applying deferral taxation of labour earnings turns out to be more attractive to taxpayers with regard to risk-taking investment than immediate labour taxation with tax-exempt earnings from investment.

Suggested Citation

  • Massarrat-Mashhadi, Nima, 2013. "The mutual impact of deferral labour taxation and capital income taxation on risk-taking behaviour: An experimental analysis," Discussion Papers 2013/1, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:20131
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    Citations

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    Cited by:

    1. Helmut Bester & Johannes Münster, 2016. "Subjective evaluation versus public information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(4), pages 723-753, April.
    2. Bester, Helmut & Krähmer, Daniel, 2013. "Exit options and the allocation of authority," Discussion Papers 2013/5, Free University Berlin, School of Business & Economics.
    3. Holtfrerich, Carl-Ludwig, 2013. "Government debt in economic thought of the long 19th century," Discussion Papers 2013/4, Free University Berlin, School of Business & Economics.

    More about this item

    Keywords

    deferral labour taxation; capital income taxation; experimental tax research; retirement accounts;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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