Market Versus Residence Principle: Experimental Evidence on the Effects of a Financial Transaction Tax

22 Pages Posted: 25 Oct 2017

See all articles by Juergen Huber

Juergen Huber

University of Innsbruck; University of Vienna - Department of Finance

Michael Kirchler

University of Innsbruck

Daniel Kleinlercher

University of Innsbruck

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

Date Written: October 2017

Abstract

The effects of a financial transaction tax (FTT) are scientifically disputed, as seemingly small details of its implementation may matter a lot. In this article, we provide experimental evidence on the different effects of an FTT, depending on whether it is implemented as a tax on markets, on residents, or a combination of both. We find that a tax on markets has negative effects on volatility and trading volume, whereas a tax on residents shows none of these undesired effects. Additionally, we observe that individual risk attitude is not related to traders’ reaction to the different forms of an FTT.

Suggested Citation

Huber, Juergen and Kirchler, Michael and Kleinlercher, Daniel and Sutter, Matthias, Market Versus Residence Principle: Experimental Evidence on the Effects of a Financial Transaction Tax (October 2017). The Economic Journal, Vol. 127, Issue 605, pp. F610-F631, 2017. Available at SSRN: https://ssrn.com/abstract=3058397 or http://dx.doi.org/10.1111/ecoj.12339

Juergen Huber (Contact Author)

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

University of Vienna - Department of Finance ( email )

Bruenner Strasse 72
Vienna, 1210
Austria

Michael Kirchler

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Daniel Kleinlercher

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

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