Why are wages in cities like New York or Paris higher than in others? This paper uses establishment mobility to separate the role of “location effects” (e.g., geography, infrastructure, agglomeration) from the spatial sorting of workers and firms. Using French administrative records and U.S. commercial data, we document that 4% of establishments relocate annually. Establishments retain their main activity and structure as they move, but adjust their workforce and wages. Combining establishment and worker mobility, we decompose wage disparities across French commuting zones. We find that spatial wage differences are driven primarily by the sorting and co-location of workers and firms: location effects explain only 2–4% of disparities, while differences in worker and establishment composition account for 30% and 17%, respectively. The remaining half reflects the co-location of high-wage workers and establishments, especially in high-wage cities. Revisiting the elasticity of local wages to population density, we find a significant coefficient of 0.007—two to three times lower than estimates that omit establishment composition.