The Evolution of Aggregate Stock Ownership: A Unified Explanation

Abstract

Since World War II, the fraction of stocks owned directly by households has decreased by more than 50 percentage points in the United States, the United Kingdom, and Sweden. We argue that tax policy is the driving force. Using data from eight countries, we show that tax-favored investors have replaced households as stockholders and that the fraction of household ownership decreases with measures of the effective marginal tax rate. We further show that the changes in stock ownership accelerate during the high-inflation period of the 1970s and the 1980s. These findings are important for policy considerations on effective taxation and for financial economics research on the longterm effects of taxation on corporate finance and asset prices.

The long-run determinants of inequality: What can we learn from top income data?

“…30 For example, Roine and Waldenström (2009) shows for Sweden that over the entire century the top income percentile only paid a marginal tax rate equal to the statutory top rate in the years around 1980. More generally, the statutory top rates have been relatively more binding to larger groups of income earners in Scandinavia and the U.K than in, e.g., Japan or the U.S. able thanks to previous efforts by Bach, Corneo and Steiner (2005) for Germany (since 1958), Roine and Waldenström (2009) for Sweden (whole period), and Rydqvist, Spizman and Strebulaev (2007) for Canada, the UK, and the US (postwar period). These series were calculated from national tax schedules for each of the countries.…”

“…Top marginal tax rate: Margtax2 except for Germany, Japan, Sweden, UK and US where it is calculated for incomes ≈ 5×GDPpc. Mitchell = Mitchell (1995, 1998a, 1998b; OECD = OECDE world tax database; RS = Rousseau and Sylla (2003); RSS = Rydqvist, Spizman and Strebulaev (2007); RW = Roine and Waldenström (2006); RZ = Rajan and Zingales (2003); WDI = World Development Indicators (World Bank). (2009) 1966-1985a ,1990-20028 8 France Piketty (2007) 1915-199818 18 Germany Dell (2009) 1925-1938,1944-199813 13 India Banerjee and Piketty (2009) 1922-199916 0 Ireland Nolan (2009) 1938, 1943, 1965,1973 Bordo et al (2001) and Laeven and Valencia (2008).…”

Taxation, Dividends, and Share Repurchases: Taking Evidence Global

“…This collection of sources provides sufficient detail to reveal all aspects of the principles for taxation of capital income across countries and over time. We also cross-check our tax classifications and rates against those reported in Rydqvist, Spizman, and Strebulaev (2009), who examine the effect of equity taxation on the evolution of stock ownership patterns in many countries. As in this paper, Rydqvist et al use the top statutory tax rate on dividends and the tax rate on capital gains that qualify as long term to conduct their analysis.…”

Payout Taxes and the Allocation of Investment

“…However, in many countries, investors can avoid some payout taxes, especially for payout in the form of repurchases (see Lewellen and Lewellen, 2006 as well as Rydqvist, Spizman and Strebulaev, 2010). Let us consider the case where not all capital gains are taxable.…”