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Valencià
This study relates the observed increase in levels and dispersion of the U.S. top wages to the increasing prominence of headhunters (professional recruiters). I illustrate the main results with a theoretical model that incorporates headhunters in the labor market framework of random search and two-sided heterogeneity. In the model, headhunters improve assortative matching between firms and their top employees via two channels: passive on-the-job search and screening of candidates. The calibrated model shows that headhunters can account for 40% of the increase in the top 1% wage share and 70% of the increase in the top 10% wage share in the U.S. from 1970 to 2010. I provide supporting empirical evidence on the importance of headhunters for the rise in top wages based on cross-country evidence on headhunter hires/fees and top income growth, as well as on micro evidence for CEO compensation in the U.S.