Heterogeneous Taxes and Limited Risk Sharing: Evidence from Municipal Bonds

• 成果类型: Article
• 署名作者: Babina, Tania; Jotikasthira, Chotibhak; Lundblad, Christian; Ramadorai, Tarun
• 署名单位: Columbia University; Southern Methodist University; University of North Carolina; University of North Carolina Chapel Hill; Imperial College London; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa028
• 发表日期: 2021
• 页码: 509
• 关键词: CORPORATE YIELD SPREADS; MARKET-SEGMENTATION; portfolio choice; asset prices; Government policy; simple-model; debt; equilibrium; liquidity; demand

摘要

We evaluate the impacts of tax policy on asset returns using the U.S. municipal bond market. In theory, tax-induced ownership segmentation limits risk sharing, creating downward-sloping regions of the aggregate demand curve for the asset. In the data, cross-state variation in tax privilege policies predicts differences in in-state ownership of local municipal bonds; the policies create incentives for concentrated local ownership. High tax privilege states have muni bond yields that are more sensitive to variations in supply and local idiosyncratic risk. The effects are stronger when local investors face correlated background risk and/or diminishing marginal nonpecuniary benefits from holding local assets.