TY  - JOUR
AU  - Smith, Matthew
AU  - Yagan, Danny
AU  - Zidar, Owen M
AU  - Zwick, Eric
TI  - Capitalists in the Twenty-First Century
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 25442
PY  - 2019
Y2  - January 2019
DO  - 10.3386/w25442
UR  - http://www.nber.org/papers/w25442
L1  - http://www.nber.org/papers/w25442.pdf
N1  - Author contact info:
Matthew Smith
Office of Tax Analysis
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
E-Mail: matthew.smith@treasury.gov

Danny Yagan
Department of Economics
University of California, Berkeley
530 Evans Hall, #3880
Berkeley, CA 94720
E-Mail: yagan@berkeley.edu

Owen M. Zidar
Department of Economics &
School of International and Public Affairs
Princeton University
237 Julis Romo Rabinowitz Building
Princeton, NJ 08544
E-Mail: ozidar@princeton.edu

Eric Zwick
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 239/822-8942
E-Mail: ezwick@chicagobooth.edu
M2  - featured in NBER digest on 2019-04-26
M3  - presented at "Corporate Finance Program Meeting", November 10, 2017
AB  - 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 paper 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.
ER  -