This paper provides a structural estimation of an equilibrium search model with on-thejob search and heterogeneity in firms' productivities using a sample of Italian workers. Allowing for productivity differentials among firms, the model is able to fit the wage distribution satisfactorily. Results indicate that arrival rates of offers for workers are higher when unemployed than when employed and firms 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 firms. Geographical stratification reveals also interesting differences in transition parameters across workers.