Human Capitalists

Andrea Eisfeldt, Antonio Falato () and Mindy Xiaolan

No 28815, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The widespread and growing use of equity-based compensation has transformed high-skilled labor from a pure labor input to a class of “human capitalists.” High-skilled labor earns substantial income in the form of equity claims to firms’ future dividends and capital gains. Equity-based compensation has increased substantially since the 1980s, representing thirty-six percent of total compensation to high-skilled labor in US manufacturing in recent years. Ignoring equity income causes incorrect measurement of the returns to high-skilled labor, with substantial effects on macroeconomic trends. In manufacturing, the inclusion of equity-based compensation almost eliminates the decline in the high-skilled labor share, and reduces the total decline in the labor share by about one-third. Only by including equity pay does our structural estimation support complementarity between high-skilled labor and physical capital greater than that of Cobb and Douglas (1928). We also provide additional regression evidence of such complementarity.

JEL-codes: E0 E25 G3 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-cwa, nep-hrm and nep-mac
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Published as Human Capitalists , Andrea L. Eisfeldt, Antonio Falato, Mindy Z. Xiaolan. in NBER Macroeconomics Annual 2022, volume 37 , Eichenbaum, Hurst, and Ramey. 2023

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