Abstract

The authors analyze the effect of worker inflows on establishments’ productivity, using a unique linked employer-employee data set for Germany. Sending and hiring establishments are ranked by their median wage. In contrast to previous studies, it is found that inflows from superior (higher-paying) establishments do not increase hiring establishments’ productivity, but inflows from inferior establishments seem to. Further analyses suggest this effect is due to positive selectivity of such inflows from their sending establishments. The findings can be interpreted as evidence of a reallocation process by which the best employees of lower-paying establishments become hired by higher-paying establishments. This process reflects the increasingly assortative pattern of worker mobility in Germany, to which the findings suggest a micro-foundation at the establishment and worker levels.