Marius A. K. Ring, Northwestern University
Joint OFS and SSB seminar. Marius Ring is a Ph.D. candidate at the Finance department at Kellogg School of Management, Northwestern University. His research interests are corporate finance, household finance, labor economics, and entrepreneurship. He will present his paper entitled "Household Responses to Capital Taxation: Evidence from Geographic Wealth Tax Discontinuities in Norway." The seminar will be at SSB.
Photo: Northwestern University
I utilize a novel quasi-experiment in Norway to examine household responses to capital taxation. The introduction of a new wealth assessment methodology in 2010 caused sizable geographic discontinuities in household exposure to wealth taxes, along both the extensive and intensive margins. I employ rich geo-coded administrative data to utilize this variation in a Boundary Discontinuity approach. I find a modest, but statistically significant positive effect of wealth taxation on saving: For every extra NOK subject to a 1.04% wealth tax, households save [0.02] NOK more. The results imply a one-year elasticity of financial saving to the net-of-tax rate of return of [-0.14 to -0.09]. I find that approximately one-fourth to one-half of the increase in saving comes from increased labor earnings, whose elasticity to the net-of-tax rate of return is [-0.05]. I further find that there is no effect on the share of wealth allocated to the stock market nor that households offset increased taxation by achieving better returns on bank savings or debt. My findings are qualitatively different from existing empirical evidence, a feature I attribute to tax evasion not being an important factor in my empirical setting.