Non-Compete Agreements: A Review of the Literature

Abstract

Non-compete agreements (NCAs) are employment contracts that limit the post-employment options of workers. On the one hand, they potentially solve an investment hold-up problem, allowing firms to make mutually beneficial investments in workers. On the other hand, the agreements potentially erode workers’ future bargaining position by limiting their outside options. In this paper, we review the economic literature on non-compete agreements in the U.S.

Keywords: Non-compete agreements, worker mobility, training, investment holdup

JEL Classification: J2, J6, K3, L4, M5