…Not from Wall Street nor Main Street, at least not as many as you would have thought, that is.
Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?
by Steven N. Kaplan, Joshua Rauh
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 6.5% 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.