The paper uses a combination of micro-level datasets to document the rise of income polarization - what some have referred to as the 'hollowing out' of the income distribution - in the United States, since the 1970s. While in the initial decades more middle-income households moved up, rather...

We investigate the returns to cognitive ability in the labor and capital markets. Using population-wide Swedish military enlistment data and administrative tax records, we find that cognitive ability is much better at predicting capital income than labor earnings. The difference is almost a...