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 …

In many OECD countries, low productivity growth has coincided with rising inequality. Widening wage and productivity … productivity-related premia that firms pay their workers above common market wages. The remaining third can be attributed to … changes in workforce composition, including the sorting of high-skilled workers into high-paying firms. Over all, these …