We analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs. This model yields a simple relationship between (i) the unemployment rate, (ii) the value of non-market time, and (iii) the max-mean wage di¤erential. The latter measure of wage dispersion is more robust than measures based on the reservation wage, due to the long left tail of the wage distribution. We estimate this wage di¤erential using data on match quality and allow for measurement error. The estimated wage dispersion and mismatch for the US is consistent with an unemployment rate of 5%. Finally, we …nd that without search frictions, output would be 6.6% higher.JEL codes: E24, J62, J63, J64We thank seminar participants at MIT, the 2009 Sandjberg conference on search models of the labor market, the Sciences Po conference on sorting, University of Munich, SED (2011) and the 2011 Tinbergen conference in Amsterdam for useful comments and discussions. Finally, we thank Bart Hobijn for sharing his labor-market ‡ow data with us and Xiaoming Cai for excellent research assistance.