72 Pages Posted: 25 Jan 2017 Last revised: 17 Aug 2017
Date Written: August 1, 2017
We examine how the enforceability of covenants not to compete (CNCs) affects monopsony power via employee mobility and wages of high-tech workers. We expect CNC enforceability to lengthen job spells and constrain mobility, but its impact on wages is ambiguous. Using a matched employer-employee dataset covering the universe of jobs in thirty U.S states, we find that higher CNC enforceability is associated with longer job spells (fewer jobs over time), and a greater chance of leaving the state. Importantly, consistent with a “lock-in” effect of CNCs, we find persistent wage-suppressing effects that last throughout a worker’s job and employment history.
Keywords: mobility, human capital, bargaining
JEL Classification: J62, J68, J31
Suggested Citation: Suggested Citation
Balasubramanian, Natarajan and Chang, Jin Woo and Sakakibara, Mariko and Sivadasan, Jagadeesh and Starr, Evan P, Locked in? The Enforceability of Covenants Not to Compete and the Careers of High-Tech Workers (August 1, 2017). US Census Bureau Center for Economic Studies Paper No. CES-WP-17-09; Ross School of Business Paper No. 1339. Available at SSRN: https://ssrn.com/abstract=2905782 or http://dx.doi.org/10.2139/ssrn.2905782
By Evan Starr