Non-compete Agreements, Wages and Efficiency: Theory and Evidence from Brazilian Football
52 Pages Posted: 14 Oct 2021 Last revised: 23 Mar 2022
Date Written: October 13, 2021
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
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