Locked In? The Enforceability of Covenants Not to Compete and the Careers of High-Tech Workers
87 Pages Posted: 25 Jan 2017 Last revised: 14 Dec 2018
Date Written: Dec 13, 2018
We examine the relationship between the enforceability of covenants not to compete (CNCs) and employee mobility and wages. Using matched employer-employee data, we find that workers starting a job in an average-enforceability state experience longer job spells and lower wages such that after 8 years they have about 8% fewer jobs and 5% lower cumulative earnings relative to equivalent workers in a non-enforcing state. We then examine the 2015 CNC ban for tech workers in Hawaii and find that this ban increased mobility by 11% and new-hire wages by 4%. These results are consistent with CNC enforceability increasing monopsony power.
Keywords: mobility, human capital, bargaining
JEL Classification: J62, J68, J31
Suggested Citation: Suggested Citation