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It’s the Market: The Broad-Based Rise in the Return to Top Talent

By Steven N. Kaplan, Joshua Rauh, Steven N. Kaplan, Neubauer Family, Distinguished Service and Professor Entrepreneurship


(1981) wrote a prescient article on “The Economics of Superstars. ” Rosen argued that technological change, particularly in information and communications, can increase the relative productivity of highly talented individuals, or “superstars. ” Essentially, such superstars become able to manage or to perform on a larger scale, applying their talent to greater pools of resources and reaching larger numbers of people. Those who are able to do so receive higher compensation. Of course, other explanations of the rise in inequality have been offered, including arguments that managerial power has increased in a way that allows those at the top to receive higher pay (Bebchuk and Fried, 2004), that social norms against higher pay levels have broken down (Piketty and Saez, 2006), and that tax policy affects the distribution of surpluses between employers and employees (Saez, 2013). This paper offers some evidence bearing on these disputes. We first look at differences in occupations in the U.S. across those with the highest income levels. The increase in pay at the highest income levels is broad-based; for example, it is not primarily or solely a phenomenon of publicly traded companies. We also discuss some evidence on the income share of the top 1 percent over time. We then turn to evidence on inequality of wealth at the top. In looking at the wealthiest Americans, those in the Forbes 400 are less likely to have inherited their wealth or to have grown up wealthy. Th

Year: 2013
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