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Biased effects of taxes and subsidies on portfolio choices

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

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    File URL: http://econstor.eu/bitstream/10419/66203/1/729713504.pdf
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    Paper provided by arqus - Arbeitskreis Quantitative Steuerlehre in its series arqus Discussion Papers in Quantitative Tax Research with number 138.

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    Date of creation: 2012
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    Handle: RePEc:zbw:arqudp:138
    Contact details of provider: Web page: http://www.arqus.info/

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    1. Sausgruber, Rupert & Tyran, Jean-Robert, 2011. "Are we taxing ourselves?: How deliberation and experience shape voting on taxes," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 164-176, February.
    2. Catherine C. Eckel & Philip J. Grossman, 2008. "Sex and Risk: Experimental Evidence," Monash Economics Working Papers archive-09, Monash University, Department of Economics.
    3. Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc.
    4. Fochmann, Martin & Kiesewetter, Dirk & Sadrieh, Abdolkarim, 2012. "Investment behavior and the biased perception of limited loss deduction in income taxation," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 230-242.
    5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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