  We estimate capital and labor income Pareto exponents across 475 country-year
observations that span 52 countries over half a century (1967-2018). We
document two stylized facts: (i) capital income is more unequally distributed
than labor income in the tail; namely, the capital exponent (1-3, median 1.46)
is smaller than labor (2-5, median 3.35), and (ii) capital and labor exponents
are nearly uncorrelated. To explain these findings, we build an incomplete
market model with job ladders and capital income risk that gives rise to a
capital income Pareto exponent smaller than but nearly unrelated to the labor
exponent. Our results suggest the importance of distinguishing income and
wealth inequality.
