Capital Share Risk

This article surveys evidence on the evolution of the capital share—the portion of output accruing to firm owners as after-tax profits—and its contribution to asset prices, arguing that capital share risk is a dominant driver of equity values. Using aggregate data on the US corporate sector, we show that the capital share has more than doubled since the late 1980s, driven primarily by a falling labor share. These changes have passed through nearly one-for-one into higher corporate payouts and help explain the long-run divergence between growth in the value of the stock market and real economic activity. Our review summarizes existing research on the measurement and structural consequences of movements in the capital share and outlines open questions about its empirical properties and endogenous links to macroeconomic variables. In sum, capital share risk is essential to understanding asset pricing dynamics in the modern economy.

Authors

Institutions

Publication Details

Journal
Annual Review of Financial Economics
Published
2026-08-17
DOI
https://doi.org/10.1146/annurev-financial-111524-013823
Primary Topic
Corporate Finance and Governance
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Capital Share Risk

Sydney C. Ludvigson, Daniel Greenwald
Annual Review of Financial Economics
Corporate Finance and Governance
article

Capital Share Risk

Sydney C. Ludvigson, Daniel Greenwald
article en

Abstract

This article surveys evidence on the evolution of the capital share—the portion of output accruing to firm owners as after-tax profits—and its contribution to asset prices, arguing that capital share risk is a dominant driver of equity values. Using aggregate data on the US corporate sector, we show that the capital share has more than doubled since the late 1980s, driven primarily by a falling labor share. These changes have passed through nearly one-for-one into higher corporate payouts and help explain the long-run divergence between growth in the value of the stock market and real economic activity. Our review summarizes existing research on the measurement and structural consequences of movements in the capital share and outlines open questions about its empirical properties and endogenous links to macroeconomic variables. In sum, capital share risk is essential to understanding asset pricing dynamics in the modern economy.

Annual Review of Financial Economics
National Bureau of Economic Research (US), Economic Policy Institute (US), New York University (US)
Decent work and economic growth
Openalex Percentile: Top 3%
Corporate Finance and Governance
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.