The Impacts of Restricting Mobility of Skilled Service Workers: Evidence from Physicians

Lavetti, Kurt, Carol Simon, and William D. White, "The Impacts of Restricting Mobility of Skilled Service Workers: Evidence from Physicians," Journal of Human Resources, Vol. 55, No. 3, (Jun. 2020).

81 Pages Posted: 20 May 2014 Last revised: 13 May 2021

See all articles by Kurt Lavetti

Kurt Lavetti

Ohio State University

Carol J. Simon

The Lewin Group

William White

Cornell University

Date Written: June 29, 2018

Abstract

We study the question: why do skilled services firms use non-compete agreements (NCAs), which prohibit workers from leaving firms and competing against them? We conduct a survey of physicians linking the use of NCAs to labor market outcomes and firm performance, and show that by deterring the poaching of patients NCAs increase the rate of return to job-tenure, with larger effects in states with more enforceable NCA laws. These effects are consistent with NCAs enabling practices to allocate clients to new physicians through intra-firm patient referrals, reducing a form of investment holdup. We discuss an array of suggestive evidence supporting this as the primary explanation, although we find NCAs also provide benefits by reducing job turnover.

Keywords: Non-Compete Agreements, Human Capital, Compensation Contracts

JEL Classification: J60, J30, K31

Suggested Citation

Lavetti, Kurt and Simon, Carol J. and White, William, The Impacts of Restricting Mobility of Skilled Service Workers: Evidence from Physicians (June 29, 2018). Lavetti, Kurt, Carol Simon, and William D. White, "The Impacts of Restricting Mobility of Skilled Service Workers: Evidence from Physicians," Journal of Human Resources, Vol. 55, No. 3, (Jun. 2020)., Available at SSRN: https://ssrn.com/abstract=2439068 or http://dx.doi.org/10.2139/ssrn.2439068

Kurt Lavetti (Contact Author)

Ohio State University ( email )

410 Arps Hall
1945 North High Street
Columbus, OH 43210
United States

Carol J. Simon

The Lewin Group ( email )

3130 Fairview Park Drive, Suite 800
Suite 800
Falls Church, VA 22042
United States

William White

Cornell University ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States

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