performance-based payment schemes. However, this finding is restricted to the subset of firms that are run by high-skilled managers. We also found that the unequal distribution of rents, with the largest wage increases occurring towards the top of the wage distribution, is to a large extent driven by the same subset of firms. Thus, another main finding of our study is that the way in which revenues from unexpected demand shocks are transmitted to workers is significantly related to heterogeneity in firm capabilities, as proxied by managerial skill.

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