by Philadelphia Fed
– this post authored by Roc Armenter
How is income divided between labor and capital? Every dollar of income earned by U.S. households can be classified as either labor earnings – wages and other forms of compensation – or capital earnings – interest or dividend payments and rent. The split between labor and capital income informs economists’ thinking on several topics and plays a key role in debates regarding income inequality and long-run economic growth. Unfortunately, distinguishing between labor and capital income is not always an easy task.
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