Abstract
We document a significant increase in the sorting of workers by cognitive and non-cognitive skills across Swedish firms 1986-2008. During this period, worker skill differences between firms increased while within-firm skill differences fell. A significant fraction of the increase in the between-firm differences in cognitive skill is due to high-skilled workers moving into the IT and telecom sector. Within-firm skill differences fell in all major industries, but particularly in the manufacturing sector. Combined with steeper firm-level skill gradients, the increase in sorting can account for 45% of the increase in between-firm wage dispersion during our period of study.
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