The Rich, Redux
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 8% 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.The last sentence seems broadly consistent with the view David Brooks has been advocating in his NY Times column.
The paper also claims that because the groups studied make up well under half of the top income group, the results are "strongly inconsistent with the claim in Dew-Becker and Gordon (2005) that CEOs, celebrities, and athletes explain most of the top end of the distribution."