Firm Differences: Skill Sorting and Software
31 Pages Posted: 10 Jun 2021
Date Written: April 2021
Recent research shows that much recent rise in wage inequality comes from growing differences between firms, especially sorting of skilled workers to high-paying firms. This paper explores the role of proprietary software in these changes. Using job ad data, we find that proprietary software is strongly associated with firm wage fixed effects and also with firm skills. Software accounts for half or more of skill sorting across firms. Moreover, both skill sorting and firm wage effects are greater for larger firms. The huge growth in proprietary software helps explain the growth in skill sorting that increases wage inequality.
Keywords: J31, J24, O3
JEL Classification: skill sorting, income inequality, information technology, firm wage differentials
Suggested Citation: Suggested Citation