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Capital and Labor: The Factor Income Composition of Top Incomes in the United States, 1962-2006

Author

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  • Anthony B. Atkinson

    (Nuffield College, Oxford, London School of Economics, and Institute for New Economic Thinking at the Oxford Martin School)

  • Christoph Lakner

    (World Bank)

Abstract

This paper finds that capital and labor incomes in the United States have become more closely associated since the 1980s. This has contributed to the well-known increase in the top 1% share of total income, exacerbating rising inequality in capital incomes and earnings. We show that the trend in the association is U-shaped as the recent increase contrasts with a tendency toward a weakening association until the 1980s. The paper, using data derived from tax records, studies the asymmetries in the association and tests for robustness to alternative income definitions, including the role of income from closely held businesses at the top.

Suggested Citation

  • Anthony B. Atkinson & Christoph Lakner, 2021. "Capital and Labor: The Factor Income Composition of Top Incomes in the United States, 1962-2006," The Review of Economics and Statistics, MIT Press, vol. 103(5), pages 892-904, December.
    • Handle: RePEc:tpr:restat:v:103:y:2021:i:5:p:892-904
    DOI: 10.1162/rest_a_01063
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    Cited by:

    1. Yonatan Berman & Branko Milanovic, 2020. "Homoploutia: Top Labor and Capital Incomes in the United States, 1950-2020," LIS Working papers 806, LIS Cross-National Data Center in Luxembourg.
    2. Iryna Kyzyma & Alessio Fusco & Philippe Van Kerm, 2022. "Distributional Change: Assessing the Contribution of Household Income Sources," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(1), pages 158-184, February.
    3. Milanovic, Branko, 2015. "Increasing capital income share and its effect on personal income inequality," MPRA Paper 67661, University Library of Munich, Germany.
    4. Fix, Blair, 2018. "A Hierarchy Model of Income Distribution," Working Papers on Capital as Power 2018/02, Capital As Power - Toward a New Cosmology of Capitalism.
    5. Rolf Aaberge & Anthony B. Atkinson & Sebastian Königs, 2018. "From classes to copulas: wages, capital, and top incomes," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(2), pages 295-320, June.
    6. Marco Ranaldi, 2022. "Income Composition Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(1), pages 139-160, March.
    7. David Gallusser & Matthias Krapf, 2022. "Joint Income-Wealth Inequality: Evidence from Lucerne Tax Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(1), pages 251-295, August.
    8. Koen Decancq, 2020. "Measuring cumulative deprivation and affluence based on the diagonal dependence diagram," METRON, Springer;Sapienza Università di Roma, vol. 78(2), pages 103-117, August.
    9. Roberto Iacono & Marco Ranaldi, 2023. "The Evolution of Income Composition Inequality in Italy, 1989–2016," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(1), pages 124-149, March.
    10. Salvatore Morelli, 2018. "Banking crises in the US: the response of top income shares in a historical perspective," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(2), pages 257-294, June.
    11. Fix, Blair, 2018. "The Growth of US Top Income Inequality: A Hierarchical Redistribution Hypothesis," SocArXiv suqnk, Center for Open Science.
    12. Roberto Iacono & Marco Ranaldi, 2018. "Sources of Inequality in Italy," Working Papers 479, ECINEQ, Society for the Study of Economic Inequality.
    13. Luca Giangregorio & Davide Villani, 2023. "Income inequality, top shares of income and social classes in the 21st century," JRC Working Papers on Social Classes in the Digital Age 2023-05, Joint Research Centre.
    14. Gabriel Zucman, 2019. "Global Wealth Inequality," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 109-138, August.
    15. Petrova, Bilyana & Ranaldi, Marco, 2021. "Determinants of Income Composition Inequality," SocArXiv vyrz7, Center for Open Science.
    16. Adam Goldstein & Ziyao Tian, 2020. "Financialization and Income Generation in the 21st Century: Rise of the Petit Rentier Class?," LIS Working papers 801, LIS Cross-National Data Center in Luxembourg.
    17. Marco Ranaldi, 2016. "On the Measurement of Functional Income Distribution," Documents de travail du Centre d'Economie de la Sorbonne 16051rrr, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Oct 2018.
    18. Fix, Blair, 2018. "The growth of US top income inequality: A hierarchical redistribution hypothesis," Working Papers on Capital as Power 2018/05, Capital As Power - Toward a New Cosmology of Capitalism.
    19. Marco Ranaldi, 2018. "On the Measurement of Functional Income Distribution," Post-Print halshs-01379229, HAL.
    20. , Stone Center & Yonzan, Nishant, 2020. "Assortative Mating and Labor Income Inequality: Evidence from Fifty Years of Coupling in the U.S," SocArXiv 4whvs, Center for Open Science.
    21. David Gallusser & Matthias Krapf, 2019. "Joint Income-Wealth Inequality: An Application Using Administrative Tax Data," CESifo Working Paper Series 7876, CESifo.
    22. Antonella D’agostino & Giovanni De Luca & Dominique Guégan, 2023. "Estimating Lower Tail Dependence Between Pairs of Poverty Dimensions in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(2), pages 419-442, June.
    23. Fix, Blair, 2018. "Hierarchy and the Power-Law Income Distribution Tail," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue OnlineFir, pages 1-21.

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