Government Policy and Ownership of Equity Securities
39 Pages Posted: 2 Jul 2009 Last revised: 1 Jan 2013
Date Written: November 11, 2012
Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effective taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices.
Keywords: Capital gains tax, income tax, stock ownership, inflation, bracket creep, pension funds
JEL Classification: G10, G20, H22, H30
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