Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?

Steven Kaplan () and Joshua Rauh

No 13270, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We consider how much of the top end of the income distribution can be attributed to four sectors -- top executives of non-financial firms (Main Street); financial service sector employees from investment banks, hedge funds, private equity funds, and mutual funds (Wall Street); corporate lawyers; and professional athletes and celebrities. Non-financial public company CEOs and top executives do not represent more than 6.5% of any of the top AGI brackets (the top 0.1%, 0.01%, 0.001%, and 0.0001%). Individuals in the Wall Street category comprise at least as high a percentage of the top AGI brackets as non-financial executives of public companies. While the representation of top executives in the top AGI brackets has increased from 1994 to 2004, the representation of Wall Street has likely increased even more. While the groups we study represent a substantial portion of the top income groups, they miss a large number of high-earning individuals. We conclude by considering how our results inform different explanations for the increased skewness at the top end of the distribution. We argue the evidence is most consistent with theories of superstars, skill biased technological change, greater scale and their interaction.

JEL-codes: G24 G3 H24 J3 J33 M52 (search for similar items in EconPapers)
Date: 2007-07
Note: CF LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Published as Steven N. Kaplan & Joshua Rauh, 2010. "Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?," Review of Financial Studies, Society for Financial Studies, vol. 23(3), pages 1004-1050, March.
Published as Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes? , Steven N. Kaplan, Joshua Rauh. in Corporate Governance , Weisbach. 2010

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Chapter: Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes? (2010)
Journal Article: Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes? (2010)
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