Journal of Labor Economics Vol. 42 No. 1 2024
Firm Productivity, Wages, and Sorting
open access
Abstract
We study the link between firm productivity and the wages that firms pay. Guided by a search-matching model with large firms, worker and firm heterogeneity, and production complementarities, we infer firm productivity by estimating firm-level production functions. Using German data, we find that the most productive firms do not pay the highest wages. Worker transitions from high- to medium-productivity firms are on average associated with wage gains. Productivity sorting—that is, the sorting of high-ability workers into high-productivity firms—is less pronounced than the sorting into high-wage firms.
- DOI
- 10.1086/722564
- Volume
- 42
- Issue
- 1
- Pages
- 85-119
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref