Marginal Taxes and the Asset Portfolios of Swedish Households

Abstract

This paper focuses on the effects of marginal tax rates, wealth, income, and a set of socioeconomic and demographic variables on the portfolio composition of households using detailed micro data on 2,000 Swedish households. In particular, efforts are made to disentangle the effects of marginal tax rates on the portfolio behavior of households. Some econometric problems involved when estimating asset demand equations in the presence of incomplete portfolios are briefly discussed. A final section examines the overall effect of marginal tax rates on asset demands by applying estimated discrete and continuous portfolio equations to compute different tax elasticities. Copyright 1990 by The editors of the Scandinavian Journal of Economics.