Luc Arrondel* and Jérôme Coffinet

This article was originally published in the January 2022 edition of the 5 papers…in 5 minutes.

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French households have an abundance of savings, amounting to nearly 16% of gross disposable income, one of the highest savings rates in Europe. Some argue that those savings are misdirected and too concentrated on real estate assets. However, French households’ financial savings, at nearly 6% of gross disposable income, also remain above the euro area average (5%). All recent statistical surveys show that the proportion of individual shareholders has fallen by around 50% between 2008 and 2016. Even if the trend reversed slightly in 2017, the number of shareholders in France today stands at around 7% of the adult population. The year 2017 was marked in France by a major tax reform designed to support shareholding: the implementation of a flat tax and the abolition of the wealth tax, replaced by the real estate wealth tax (Impôt sur la Fortune Immobilière). The objectives of this reform were, on the one hand, to accelerate capital mobility and, on the other, to encourage long-term productive investment. Announced in May 2017, following the presidential and legislative elections, the new policy was adopted in October 2017 and implemented in January 2018. Aside from this reform, other exogenous factors are likely to have favorably influenced in the same period households’ decisions regarding risky assets: the stock market recovery and the ensuing optimism of expectations, as well as the recovery of household confidence.

In their paper, Luc Arrondel and Jérôme Coffinet analyze the risky portfolios of French households from the last two waves (2014-2015 and 2017-2018) of INSEE’s panel survey “Life History and Wealth”. There are in fact three main ways of investing in equities: buying shares directly; buying them through mutual funds; and finally taking out unit-linked life insurance contracts. The authors show that direct shareholding increases strongly with the level of wealth and with age; it also depends on the level of education, the financial situation of the parents. Subjective variables also help to explain risky portfolio behavior, whether it be preferences for savings (risk aversion, time preference) or expectations on financial market (expected return and ambiguity). The demand for stocks via life insurance shows specific determinants: life cycle effect (age and foresight) but fewer links with stock market characteristics. So, the demand for risky assets depends strongly on the level of household wealth and expectations of returns on the stock market, two variables that have been affected by the by the 2017 reform. Double difference analysis between the two waves makes it possible to quantify the effects of the reform. Arrondel and Coffinet show no significant effect on risky behaviors except for the amount of wealth held directly in the form of shares. While the 2017 tax reform does not seem to have had any anticipated effect on the spread of share ownership, an impact on the amounts owned by households appears to be materializing, although this can be explained by the sharp rise in share prices between 2014 and 2018. Thus, the share of financial assets held directly in the form of equities increased slightly. These results are a necessary but not sufficient condition to conclude that tax reform have an effect on household demand for risky assets (the full impact of the 2017 reform was not visible yet in the 2017-2018 survey). All these results have to be confirmed with the new wave of the INSEE’s panel survey.

Original title of the article: Preparing for the tax reform: the risky French households’ portfolio in 2018
Published in: PSE working paper n°2021-49
Available at:

* PSE Researcher

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