The first chapter of this dissertation studies the causes of rising sorting between high-skill workers and high-paying firms. Despite accounting for a substantial share of rising wage inequality, little is known about how or why sorting is rising. To understand how, I develop a novel decomposition method to measure the relative importance of different worker flow channels. I find that labor market entry of young workers accounts for about half of the total rise in sorting. To understand why sorting is rising, I use exogenous variation induced by the fall of the Soviet Union to estimate the effect of trade liberalization on rising sorting within German local labor markets. I find that export exposure can account for 14% of the rise in sorting. I then apply the decomposition method to the export-induced changes in employment to confirm an important role for labor market entry in rising sorting.

The second chapter studies the effect of temporary employment shocks on the future earnings of professional golfers. Although a large literature documents the persistent effects of temporary employment shocks on the earnings of wage-and-salary workers, we have little evidence on the effects on self-employed workers. I exploit entry rules of the PGA TOUR to estimate the long-term effects of temporary employment shocks using a regression discontinuity design. Although, I find large earnings differences in first year after an employment shock, these differences quickly dissipate. Furthermore, I find no effects of employment shocks on performance. Golfers have less job stability than typical workers and these differences likely explain why the earnings losses of golfers are less persistent than of wage-and-salary workers.

The third chapter studies the evolution of wages at large firms. Although large firms have paid significantly higher wages for over a century, we document that the large-firm wage premium has declined over the last thirty years. Decomposing pay into worker and firm fixed effects, we show that the decline is due to a reduction in firm effects at large firms, while worker composition has changed little. We also find that the majority of the change occurs within industries.