The Real Effects of a Tobin Tax: Evidence from a Quasi‐Natural Experiment in China

42 Pages Posted: 9 May 2014 Last revised: 7 Jul 2014

See all articles by Yongxiang Wang

Yongxiang Wang

University of Southern California - Marshall School of Business

Date Written: June 1, 2014

Abstract

This paper evaluates the real effects of a Tobin tax by investigating a policy experiment that reduced this tax on only a subset of equity securities in China. Affected stocks experienced an increase in both liquidity and return volatility. More importantly, the tax reduction further led to an increase in market valuation, investment, innovation, and equity financing, suggesting strong feedback effects from the secondary capital market to the real economy. My results illustrate the negative consequences of imposing a Tobin tax on the financial markets.

Keywords: Tobin Tax, Investment, Innovation, Feedback Effects, Liquidity, Volatility

JEL Classification: H20, G10, G30

Suggested Citation

Wang, Yongxiang, The Real Effects of a Tobin Tax: Evidence from a Quasi‐Natural Experiment in China (June 1, 2014). Available at SSRN: https://ssrn.com/abstract=2433302 or http://dx.doi.org/10.2139/ssrn.2433302

Yongxiang Wang (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

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