Introduction

Notwithstanding the differentiated institutional settings prevailing in Europe, the current debate on the ongoing creation of a European internal market largely assumes a substantial degree of homogeneity of agents' behaviour across individual countries. In particular, as far as the European financial liberalisation is concerned, the existing degree of capital mobility provides the basis for the assumption of behavioural similarity underlying the treatment of matters such as fiscal harmonisation. However, a common sense observation would suggest that, along with taxation systems, other institutional arrangements can ultimately affect agents' behaviour, including a certain degree of heterogeneity among European countries which could, in turn, lead to a reconsideration of the fiscal harmonisation process itself.

Following this line of research, the present chapter focusses on the determinants of the structure of households' financial portfolios in order to single out similarities among selected European countries. To this end the chapter discusses and estimates an augmented portfolio model incorporating a number of salient institutional features through the key distinction between marketable and non-marketable assets. The powerful role of non-marketable wealth in determining portfolio allocation has long been recognised in the theoretical as well as in the empirical literature. In principle, the presence of non-marketable (highly if not perfectly non-liquid) assets implies that, even with the assumption of homogeneous expectations, investors do hold different portfolios of marketable assets. It is not surprising, therefore, that empirical applications have been (successfully) confined to the analysis of individual data which capture well the effects due to structural differences.