DP15480 Firm Heterogeneity in Skill Returns
We quantify firm heterogeneity in skill returns and present direct evidence of worker–firm complementarities. Using population data linked with cognitive and noncognitive skill measures, we estimate a model of firm-specific returns to these attributes. We find evidence of significant return heterogeneity, sorting, and earnings convexification: (1) Skills command different returns across employers; returns to the two skills correlate weakly within-firm. (2) Workers with large endowments of a skill populate firms with higher returns to it. Sorting intensity grows with cross-sectional dispersion of that skill return. (3) Complementarities and sorting have nonmonotonic effects, raising both level and skewness of earnings.