Capitalists in the Twenty-First Century*

By Matthew G. Smith, Danny Yagan, Owen M. Zidar, Eric Zwick. Quarterly Journal of Economics, 2019

284 citations recorded by the source corpus.

How important is human capital at the top of the U.S. income distribution? A primary source of top income is private “pass-through” business profit, which can include entrepreneurial labor income for tax reasons. This article asks whether top pass-through profit mostly reflects human capital, defined as all inalienable factors embodied in business owners, rather than financial capital. Tax data linking 11 million firms to their owners show that top pass-through profit accrues to working-age owners of closely held mid-market firms in skill-intensive industries. Pass-through profit falls by three-quarters after owner retirement or premature death. Classifying three-quarters of pass-through profit as human capital income, we find that the typical top earner derives most of her income from human capital, not financial capital. Growth in pass-through profit is explained by both rising productivity and a rising share of value added accruing to owners.

Subfields: Accounting, Economics and Econometrics, Gender Studies

View Paper: https://www.semanticscholar.org/paper/5d5e74a6533ec29b74e28d58b8cf10c1e7cfabdc

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Simcha Barkai
2. David Dorn
3. David S. Lee
4. David H. Autor
5. John Van Reenen
6. Brigham R. Frandsen

In Economics and Econometrics

1. David H. Autor
2. John Van Reenen
3. David Dorn
4. Thomas Lemieux
5. Lawrence F. Katz
6. Daron Acemoglu
7. David S. Lee
8. Florian Hoffmann

In Gender Studies

1. David H. Autor
2. Simcha Barkai
3. Christina Patterson
4. David S. Lee
5. John Van Reenen
6. Claudia Olivetti
7. C. Myers
8. Lingsheng Meng

Citations in the corpus

• Growing Income Inequality in the United States and Other Advanced Economies (2020, background): “3 Smith et al. (2019) show that a large fraction of top incomes consists of entrepreneurial income earned through pass-through corporations (S-corporations and partnerships).”
• Declining Labor and Capital Shares (2020, background): “Labor Income in Disguise Smith et al. (2019) present evidence that some portion of top private business income is wage income in disguise.”
• The Fall of the Labor Share and the Rise of Superstar Firms* (2017, background): “Although there is controversy over the degree to which the fall in the labor share of GDP is due to measurement issues such as the treatment of capital depreciation (Bridgman 2014), housing (Rognlie 2015), self-employment (Gollin 2002; Elsby, Hobijn, and Sahin 2013), intangible capital (Koh, Santaeu”