Identification of Search Models using Record Statistics∗

This paper shows how record-value theory, a branch of statistics that deals with the timing and magnitude of extreme values in sequences of random variables, can be used to nonparametrically identify the offer distribution of wages workers face. Using NLSY wage data, I show that the data supports the hypothesis that the wage offer distribution is Pareto but rejects that it is lognormal. In addition, I show that my approach can be used to construct a bound on the return to job-specific human capital. Using the same NLSY data, I find that job-specific human capital plays only a minor role in the wage growth of the workers in my sample. Instead, wage growth among the young workers in my sample appears to be driven primarily by the accumulation of general human capital as well as on-the-job search.