Physical Capital, Human Capital Distribution of Earnings

Abstract- The relationship between physical capital. human capital and the distribution of turnings is examined empirically using cross-sectional microdata within SklSAs. Comprtrarive advantage in workers and a scale-of-resources effect among firms is predicted to lead to a rel~ti~)n~hip between capital and earnings. The level of earnings is found to be positively related to capital intensity and nrgntiveiy related to capital dispersion. Earnings inequality appears to be greater the ktrger the dispersion in capital. The results support the view that industry structure and tho distribution of physical capital have direct effects on the structure and distribution of earnings. after controlling for differences in human capital. WHILE the rel~tionshjp between human capital and earnings has been studied extensively, the retation-ship between physical capital and the distribution of earnings has received relatively little theoretical or empirical attention. A well-known article by Gri-Iiches (1969) proposed the capital-skill comple-mentarity (CSC) hypothesis, which implies that th