Regional Disadvantage? Non-Compete Agreements and Brain Drain

Abstract:     
We construct inventor career histories using the U.S. patent record from 1975 to 2005 and demonstrate a brain drain among patenting inventors from states that enforce employee non-compete agreements to those that do not. Non-compete enforcement drives away inventors with greater human and social capital, while retaining those who are less productive and less connected. In addition to showing support for these conclusions in cross-sectional analyses, we address causality-related concerns with a difference-in-differences study design based on an inadvertent reversal of Michigan’s non-compete enforcement policy.

Number of Pages in PDF File: 41

Keywords: non-compete agreements, labor mobility, technology policy, inventor migration, regional economics, patents

JEL Classification: O30, O38, R10, R12

working papers series