firm heterogeneity to wage inequality. Inspired by sorting theory, we infer firm productivity from estimating firm …-level production functions, taking into account that worker ability and firm productivity may interact at the match level. Using German …, driven by new matches between low-productivity firms and low-ability workers. At the top, sorting decreases, reflected in …

We present new evidence on how employment growth varies across firm types (size, productivity, and wage) and over the … hirings from/to employment (poaching) and net hirings from nonemployment. High-productivity firms are the most growing firms …

strength of assortative matching. The basic intuition underlying our empirical strategy is that, in the presence of positive … (negative) assortative matching, good workers are more (less) likely to move to better firms than bad workers. Assuming that … matching is pervasive in the labor market. This result is in contrast with what we find from correlating the worker and firm …

provides a valid approximation of observed wages and matching patterns for a large part of the data. For low-type workers …