Capitalists in the twenty-first century

Matthew Smith, Danny Yagan, Owen Zidar, Eric Zwick

Research output: Contribution to journalReview articlepeer-review

97 Scopus citations


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 article 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.

Original languageEnglish (US)
Pages (from-to)1675-1745
Number of pages71
JournalQuarterly Journal of Economics
Issue number4
StatePublished - Nov 1 2019

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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