This paper provides a structural estimation of an equilibrium search model with on-thejob search and heterogeneity in ¯rms ' productivities using a sample of Italian workers. Allowing for productivity di®erentials among ¯rms, the model is able to ¯t the wage distribution satisfactorily. Results indicate that arrival rates of o®ers for workers are higher when unemployed than when employed and ¯rms exploit their monopsnony power when setting wages. As a result, workers earn far less than their marginal product. The paper also provides an estimate of the underlying distribution of productivity across ¯rms. Geographical strati¯cation reveals also interesting di®erences in transition parameters across workers
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