Non-compete Agreements, Wages and Efficiency: Theory and Evidence from Brazilian Football

52 Pages Posted: 14 Oct 2021 Last revised: 23 Mar 2022

See all articles by Bernardo Guimaraes

Bernardo Guimaraes

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Joao Paulo Pessoa

Getulio Vargas Foundation (FGV), Sao Paulo School of Economics, Students; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Vladimir P. Ponczek

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Date Written: October 13, 2021

Abstract

We propose a model to study non-compete agreements and evaluate their quantitative effects. We explore an exogenous policy change that removed non-compete clauses for Brazilian footballers, the Pele Act of 1998. The Act raised players' lifetime income but changed the wage profile in a heterogeneous way, reducing young players' salaries. We structurally estimate the model's parameters by matching wages and turnover profiles in the post Act period. By changing the parameter capturing the non-compete friction, we match the changes in the age-earnings profile. The bulk of income gains is due to distributional forces, with efficiency gains playing a minor role.

Keywords: Labor mobility, labor frictions, wage profile, labor turnover

JEL Classification: J30, J41, J60, K31, Z22

Suggested Citation

Guimaraes, Bernardo and Pessoa, Joao Paulo and Ponczek, Vladimir P., Non-compete Agreements, Wages and Efficiency: Theory and Evidence from Brazilian Football (October 13, 2021). Available at SSRN: https://ssrn.com/abstract=3942192 or http://dx.doi.org/10.2139/ssrn.3942192

Bernardo Guimaraes (Contact Author)

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Rua Itapeva, 474
Sao Paulo
Brazil

Joao Paulo Pessoa

Getulio Vargas Foundation (FGV), Sao Paulo School of Economics, Students ( email )

Rua Itapeva 474 s.1202
São Paulo
Brazil

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Vladimir P. Ponczek

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

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