The French Households’ Portfolio Through the Financial Almost Ideal Demand System

Résumé 0

The composition of the financial wealth of French households has dramatically changed over the last decades. Currency plus overnight deposits and short-term saving deposits accounted for 58% of the total financial wealth in 1978 versus around 30% in 2016. Life insurance contracts accounted for 44% of French households’ portfolio in 2016 versus 4% in 1978. We seek explanatory factors for these changes by applying the Deaton and Muellbauer model to French households’ portfolio choices. Wealth and real returns are the key determinants of the long run dynamics of the different asset shares in the portfolio. We use the model to simulate the effect of the replacement in 2018 of the various tax regimes of most financial products with a flat tax on savings income. We find that the flat tax should support investment in equities at the expense of life insurance contracts.