Comment

This insightful paper by Eisfeldt, Falato, and Xiaolan introduces the concept of “human capitalists,” employees below the C-suite who receive a significant share of their pay as equity-based compensation. By collecting data on reserved shares across firms, this study documents the importance of this phenomenon in the corporate manufacturing sector. It then develops a theoretical equilibrium model to organize the correct income and value-added accounting. Finally, it argues that acknowledging the existence human capitalists can change our view on two key macroeconomic questions: (i) the recent decline in the aggregate labor share is smaller than previously estimated and (ii) the degree of capital-skill complementarity in aggregate technology is stronger than we thought. This is a paper of general interest because its findings are relevant for a number of diverse literatures in economics: the measurement of workers’ compensation, beyond wages; the prevalence of incentive-based pay and the design optimal labor contracts; the dynamics of the aggregate labor share; patterns of capital-labor substitution in the aggregate economy; intangible capital; and the nature of idiosyncratic labor market (or, as it is called in finance, background) risk. The paper provides new data, new facts, and new insights that affect all these research areas where an accurate measurement of worker compensation, and how it relates to the marginal product of labor, is crucial. I will organize my comments in five parts: (i) quick model recap, (ii) measurement of the skilled labor share of income, (iii) model identification,