Institutional arrangements and the labor market functioning: The case of executive search

Do headhunters firms improve the matching process, and therefore contribute to the efficiency of the labor market of top executives? Far from being a passive vector, on one hand they contribute to shape companies' specific demand; on the other hand, they initiate the supply of candidates resorting to their networks. Headhunters implement idiosyncratic categories of evaluation in order to fit as well as possible both parties' preferences. If such a type of transaction reduces information costs, it nevertheless produces distortions with regard to the market efficiency. It introduces a bias in favor of mobility between identical jobs (in terms of occupation and industry) and therefore participates to the labor market segmentation, which impedes substitution mechanisms. As a consequence, they contribute to the inflationary pressures that characterize the top executives' labor market.