Locked in? The Enforceability of Covenants Not to Compete and the Careers of High-Tech Workers
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
By Evan Starr