Beschreibung

"We study the link between firms’ productivity and the wages firms pay. Guided by labor market 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 data, we find that high wages are not necessarily a reflection of high firm productivity. Observed worker transitions towards higher wages are sometimes directed downwards on the firm-productivity ladder. Worker sorting into high-productivity firms is thus less pronounced than sorting into high-wage firms. Consequently, an implication of increasing wage sorting could be decreasing allocative efficiency." (Author's abstract, IAB-Doku) ((en))