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The Role of Headhunters in Wage Inequality: It's All about Matching

Alexey Gorn ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This study relates the increase in the U.S. top wages to the increasing prominence of headhunters. Headhunters improve the matching between firms and employees via two channels: screening of candidates and passive on-the-job search. I incorporate headhunters in the labor market framework of random search with two-sided heterogeneity. The calibrated model shows that headhunters can account for 35% of the increase in the top 1% wage share and 69% of the increase in the top 10% wage share in the U.S. from 1970 to 2010. I provide supporting cross-country evidence on headhunter hires/fees and top income growth, as well as micro evidence for CEO compensation.

Keywords: wage distribution; top incomes; sorting; on-the-job search; headhunters (search for similar items in EconPapers)
JEL-codes: C78 D83 E24 J24 J62 J63 (search for similar items in EconPapers)
Date: 2019-03-07
New Economics Papers: this item is included in nep-hrm, nep-lab and nep-mac
Note: ag980
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1926

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