Template-Type: ReDIF-Paper 1.0
Title: Human Capitalists, Reallocation and the Global Division of Labor
Author-Name: Jan Schymik
Author-Email: jschymik@mail.uni-mannheim.de

Classification-JEL: F14, F16, J33, L22
Keywords: Top Inequality, Offshoring, Equity Ownership

Abstract: The rise of top inequality in the United States and many other countries in recent
decades is well documented but its causes remain controversial. Using data on equity ownership
and income streams of corporate top earners in the U.S. and the U.K., this paper
assesses the role of reallocation towards "superstar firms" for top earners. If economic
activity is reallocated toward the largest firms in the economy, this affects equity prices,
top earners' marginal product and their incentives. Exploiting the global rise of trade
in intermediate inputs as a source for economic reallocation, I assess three predictions of
this hypothesis: (i) equity prices increase more for superstar firms, (ii) the value of equity
ownership and labor incomes of top earners in superstar firms increase, (iii) equity
ownership responds more elastically than labor incomes which changes the compensation
structure of top earners. The results suggest that focusing on the income skill premium
fundamentally underestimates the returns to globalization for top earners. Furthermore,
the reallocation-channel rationalizes the prevalence of capital incomes vis-à-vis labor incomes
for top earners.

Note: 
Length: 60
Creation-Date: 2020-07
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp141
Handle: RePEc:bon:boncrc:CRCTR224_2020_141v2