DP7356 The Evolution of Aggregate Stock Ownership---A Unified Explanation

Author(s): Kristian Rydqvist, Joshua Spizman, Ilya Strebulaev
Publication Date: July 2009
Keyword(s): Bracket creep, capital gains tax, Income tax, Inflation, Pension funds, stock ownership
JEL(s): G10, G20, H22, H30
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7356

Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions.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.