The Evolution of the High-Ability Firm

The central role of human capital for productivity is widely acknowledged in the economic sciences. This project studied the distribution of human capital across firms over time. The last decades have witnessed an increase in earnings inequality in Sweden and most other Western countries. Previous research on Swedish data has noted that the increase in earnings inequality has only taken place between workers in different firms and not within firms. However, it has not been known whether this is due to a concentration of high-skilled workers in certain firms or to an increase in productivity differences between firms independent of the distribution of human capital. A study showed that about half of the increase in earnings inequality between firms is due to an increasing concentration of workers with more human capital to some firms.