Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?

Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?

By
Steven N. Kaplan, Joshua D. Rauh
Review of Financial Studies.
2010, Vol. 23, Issue 3, Pages 1004-1050

We study how much of the top end of the income distribution is represented by four sectors—non-financial-firm top executives (Main Street); investment bankers and hedge, private equity, and mutual fund investors (Wall Street); corporate lawyers; and athletes and celebrities. Wall Street individuals comprise a higher percentage of the top income brackets than nonfinancial executives of public companies. While top executives’ representation in the top brackets has increased from 1994 to 2004, Wall Street’s representation has likely increased even more. We discuss the implications of our findings for different explanations for the increased skewness at the highest income levels.