We propose a theory of firm production that requires diverse inputs. We show that in a competitive labor market, firms differ in their skill composition. Organizations with higher Total Factor Productivity (TFP) are larger and hire from a broader range of skills. Technological progress leads to...

We investigate under which conditions price competition in a market with matching frictions leads to sorting of buyers and sellers. Positive assortative matching obtains only if there is a high enough degree of complementarity between buyer and seller types. The relevant condition is...