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Consider This: Training, Wages, and the Enforceability of Covenants Not to Compete

46 Pages Posted: 29 Jan 2015 Last revised: 14 Aug 2017

Evan P Starr

University of Maryland Robert H Smith School of Business

Date Written: August 13, 2017

Abstract

This study examines the effect of noncompete enforceability on training and wages. An increase from non-enforcement to mean enforceability is associated with a 14% increase in training, which tends to be firm-sponsored and designed to upgrade or teach new skills. In contrast to theoretical expectations, the results show no evidence of a relationship between noncompete enforceability and self-sponsored training. Despite the increases in training, an increase from non-enforcement to mean enforceability is associated with a 4% decrease in hourly wages. One noncompete policy that does not reduce training but is associated with higher wages throughout the distribution is the requirement that firms provide workers with consideration beyond continued employment in exchange for signing noncompetes.

Keywords: Training, Wages, Employee Mobility, Covenants Not to Compete

JEL Classification: J3, J4, J6, K3, L41, M53

Suggested Citation

Starr, Evan P, Consider This: Training, Wages, and the Enforceability of Covenants Not to Compete (August 13, 2017). Available at SSRN: https://ssrn.com/abstract=2556669 or http://dx.doi.org/10.2139/ssrn.2556669

Evan P Starr (Contact Author)

University of Maryland Robert H Smith School of Business ( email )

United States
(301) 405-2320 (Phone)

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