Firm Productivity, Wages, and Sorting

Benjamin Lochner; Bastian Schulz

doi:10.1086/722564

Firm Productivity, Wages, and Sorting

^*Corresponding author for this work

Department of Economics and Business Economics

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaper › Journal article › Research › peer-review

4 Citations (Scopus)

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.

Original language	English
Journal	Journal of Labor Economics
Volume	42
Issue	1
Pages (from-to)	85-119
Number of pages	35
ISSN	0734-306X
DOIs	https://doi.org/10.1086/722564
Publication status	Published - Jan 2024

Keywords

Assortative Matching
Labor Market Sorting
Wage Inequality
Job Mobility
Unobserved Heterogeneity
Firm Productivity
Production Function Estimation

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10.1086/722564

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Cite this

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KW - Job Mobility

KW - Unobserved Heterogeneity

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KW - Production Function Estimation

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Firm Productivity, Wages, and Sorting

Abstract

Keywords

Access to Document

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