Gorn, A.
The Role of Headhunters in Wage Inequality: It's All about Matching
WP Number: 1907
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
JEL Codes: E24 D83 C78 J24 J62 J63
Author links:
PDF: wp1907.pdf 
Open Access Link: 10.17863/CAM.38661
