Overview

Abstract (English)

This paper examines a survey of 5,282 Canadian households and estimates a model for the household demand of financial assets with the marginal income tax rate as the explanatory variable of most interest. An effort is made to increase the robustness of this type of estimation when done with a two-step Heckman (1979) procedure by adding a selection control variable in the first stage. Differences in the portfolio response to tax rate increases between Canadian and U.S. households are also evaluated. Household responses to taxation of investment income on both the asset selection and allocations are estimated by exploiting provincial variation in marginal income tax rates. The asset habitat decision is also examined due to the availability of data on the composition of RRSP accounts.

Abstract (French)

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