We develop and estimate an equilibrium job search model of worker careers, allowing for human capital accumulation, employer heterogeneity and individual-level shocks. Monthly wage growth is decomposed into the contributions of human capital and job search, within and between jobs. Human capital accumulation is found to be the most important source of wage growth in early phases of workers' careers, but is soon surpassed by search-induced wage growth. Conventional measures of the returns to tenure hide substantial heterogeneity between different workers in the same firm and between similar workers in different firms.

have given us useful ideas and comments. Henning Bunzel has been invaluable in the development of the data we use. We acknowledge financial support from LMDG and CAP, Aarhus University (LMDG is a Dale T. Mortensen Visiting Niels Bohr professorship project funded by the Danish National Research Foundation; CAP is a research unit funded by the Danish Council for Independent Research). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Our main objective in this paper is to quantify the relative importance of human capital accumulation and imperfect labor market competition in shaping individual labor earnings profiles over the working life. We contribute to the empirical literature on wage equations along three broad dimensions.The first one relates to Mincer's (1974) original specification of log-earnings as a function of individual schooling and experience. In their review of Mincer's stylized facts about postschooling wage growth in the United States, Rubinstein and Weiss (2006) list human capital accumulation and job search as two of the main driving * Bagger: Royal Holloway, University of London, Egham, Surrey TW20 0EX, UK, and CAP (e-mail: jesper.bagger@rhul.ac.uk); Fontaine: Université de Lorraine, 6 rue des Michottes, 54000 Nancy, France, BETA-CNRS, and CREST-ENSAE (e-mail: francois.fontaine@univ-lorraine.fr); Postel-Vinay: Department of Economics, University College London, Drayton House, 30 Gordon Street, London WC1H 0AX, UK, and Sciences Po, Paris (e-mail: f.postel-vinay@ucl.ac.uk); Robin: Department of Economics, Sciences Po, 28, rue des Saints Pères, 75007 Paris, France, and UCL (e-mail: jeanmarc.robin@sciences-po.fr). We are grateful to three anonymous referees for very detailed and constructive comments. We also wish to thank Joe Altonji, Henning Bunzel, Ken Burdett, Melvyn Coles, and Rune Vejlin, as well as participants in numerous seminars and conferences, for useful comments. The usual disclaimer applies. Bagger and Fontaine gratefully acknowledge financial support from LMDG and CAP, Aarhus University (LMDG is a Dale T.

This paper studies wage dispersion in an equilibrium on-the-job-search model with endogenous search intensity. Workers differ in their permanent skill level and firms differ with respect to productivity. Positive (negative) sorting results if the match production function is supermodular (submodular). The model is estimated on Danish matched employer-employee data. We find evidence of positive assortative matching. In the estimated equilibrium match distribution, the correlation between worker skill and firm productivity is 0.12. The assortative matching has a substantial impact on wage dispersion. We decompose wage variation into four sources: Worker heterogeneity, firm heterogeneity, frictions, and sorting. Worker heterogeneity contributes 51% of the variation, firm heterogeneity contributes 11%, frictions 23%, and finally sorting contributes 15%. We measure the output loss due to mismatch by asking how much greater output would be if the estimated population of matches were perfectly positively assorted. In this case, output would increase by 7.7%.

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