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Asset demand in the financial AIDS portfolio model -- evidence from a major tax reform

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  • Richard Ochmann

Abstract

In this article, new evidence from the financial Almost Ideal Demand Sysytem (AIDS) portfolio model is featured, making use of additional exogenous rate-of-return variation, which has been mostly disregarded in the relevant literature so far. A Two-Stage Budgeting Model (2SBM) of asset demand is constructed and applied to German survey data for a time frame where first implementations of a major income tax reform in Germany significantly altered the tax schedule. Marginal Tax Rates (MTR) at the household level are simulated in an income taxation module. Relatively great rate-of-return elasticities for, among others, owner-occupied housing as well as capital and private pension insurances suggest that return-related reactions are stronger at the asset allocation decision than they are usually found for the consumption-savings decision.

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  • Richard Ochmann, 2013. "Asset demand in the financial AIDS portfolio model -- evidence from a major tax reform," Applied Financial Economics, Taylor & Francis Journals, vol. 23(8), pages 649-670, April.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:8:p:649-670
    DOI: 10.1080/09603107.2012.744134
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    1. Richard Ochmann, 2014. "Differential income taxation and household asset allocation," Applied Economics, Taylor & Francis Journals, vol. 46(8), pages 880-894, March.
    2. T. van der Valk, 2019. "Quid pro quo: the institutional environment and the allocation of household wealth," Working Papers 19-25, Utrecht School of Economics.

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