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

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  • Gorn, A.

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.

Suggested Citation

  • Gorn, A., 2019. "The Role of Headhunters in Wage Inequality: It's All about Matching," Cambridge Working Papers in Economics 1926, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1926
    Note: ag980
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    References listed on IDEAS

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    Cited by:

    1. Alexey Gorn, "undated". "Passive Search and Jobless Recoveries," Working Papers 202113, University of Liverpool, Department of Economics.

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    More about this item

    Keywords

    wage distribution; top incomes; sorting; on-the-job search; headhunters;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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