Bagger, Jesper; Lentz, Rasmus - School of Economics and Management, University of Aarhus - 2014
differ in their permanent skill level and firms differ with respect to productivity. Positive (negative) sorting results if … decompose wage variation into four sources: Worker heterogeneity, firm heterogeneity, frictions, and sorting. Worker … heterogeneity contributes 51% of the variation, firm heterogeneity contributes 11%, frictions 23%, and finally sorting contributes …