Comment

This paper provides the most careful and clearheaded study to date of the factor distribution of income in the United States. Its most important contribution is the introduction of a new concept, “factorless income,” which is the residual after assigning aggregate income to labor and capital. Unlike many other studies, which simply assume that factorless income corresponds to either economic profit, unmeasured capital, or a return premium, this paper is agnostic and entertains all three possibilities. It turns out that none of the three is a perfect match for the data, but economic profit is a particularly ill-fitting explanation. This calls into question some recent work on rising markups in the United States, and I suspect that Karabarbounis andNeiman’s critique will quickly become central to the literature. The following comment has two parts. First, I will provide my own brief tour of factor income trends in the United States, covering much of the same territory as Karabarbounis and Neiman but in a cursory and simplifiedway. Second, I will discuss the paper’s key contributions, especially its rejection of “case P,” the interpretation of factorless income as economic profit. I conclude that the paper is quite successful inmaking its case, and that futurework should build upon it by combining the paper’s three cases, with a special emphasis on “case R,” the discrepancy between interest rates and the rate of return on capital.