Scandinavian Working Papers in Economics

SIFR Research Report Series,
Institute for Financial Research

No 68: The Evolution of Aggregate Stock Ownership - A Unified Explanation

Kristian Rydqvist (), Joshua Spizman () and Ilya Strebulaev ()
Additional contact information
Kristian Rydqvist: Binghamton University
Joshua Spizman: Binghamton University
Ilya Strebulaev: Stanford University

Abstract: Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions.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 effctive 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-codes: G10; G20; H22; H30

53 pages, September 15, 2009

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