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.
Second version, May, 2022
D30: Distribution: General
J23: Labor Demand
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
J31: Wage Level and Structure; Wage Differentials