1 Introduction 1

2 Motivating evidence and hypothesis 6

3 Data and empirical strategy 10
3.1 Data 10
3.2 Empirical strategy 12

4 Results of the empirical analysis 16
4.1 Intensive vs. extensive margin 17
4.2 Further evidence on the mechanism 18
4.3 Top incomes and bank deposits 19
4.4 Alternative explanations and additional results 20

5 Macroeconomic model 21
5.1 Model setup 21
5.2 Specification and calibration 26

6 Quantitative experiments in general equilibrium 30
6.1 Aggregate and firm-level outcomes 30
6.2 The welfare effects of rising top income shares 33
6.3 Alternative inequality source, complementarities and growth 37

7 Conclusion 39

References 39