Abstract
The relationship between physical capital, human capital and the distribution of earnings is examined empirically using cross-sectional microdata within SMSAs. Comparative advantage in workers and a scale-of-resources effect among firms is predicted to lead to a relationship between capital and earnings. The level of earnings is found to be positively related to capital intensity and negatively related to capital dispersion. Earnings inequality appears to be greater the larger the dispersion in capital. The results support the view that industry structure and the distribution of physical capital have direct effects on the structure and distribution of earnings, after controlling for differences in human capital.
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