Reference number: OPUSeJ 201302091257WSM
Links: to published article: http://rfs.oxfordjournals.org/content/23/3/1004.abstract
to pre-reviewed version: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931280
Title: Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes? of article
Authors: Kaplan, Steven N1. and Joshua Rauh2
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.
Author bio: N/A
Sponsor editor: N/A
Affiliations/disclaimers/funding/acknowledgements: 1 University of Chicago – Booth School of Business; National Bureau of Economic Research (NBER). 2 Stanford Graduate School of Business; National Bureau of Economic Research (NBER).
Keywords: Compensation; Wage Differentials; Income Inequality; Corporate Governance
Subject: Economics/ bank bonuses
Bibliography: see Forum
Citation: Kaplan, Steven N. and Joshua Rauh, 2010, “Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?”, Rev. Financ. Stud. 23:3, 1004-1050. doi: 10.1093/rfs/hhp006. published online: March 3, 2009 http://rfs.oxfordjournals.org/content/23/3/1004.abstract