Non-Compete Agreements in a Rigid Labour Market: The Case of Italy

57 Pages Posted: 22 Mar 2023

See all articles by Tito Boeri

Tito Boeri

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Andrea Garnero

Paris School of Economics (PSE); Organization for Economic Co-Operation and Development (OECD); Université Libre de Bruxelles (ULB)

Lorenzo G. Luisetto

University of Michigan

Abstract

Non-compete clauses (NCCs) limiting the mobility of workers have been found to be rather widespread in the US, a flexible labour market with large turnover rates and a limited coverage of collective bargaining. This paper explores the presence of such arrangements in a rigid labour market, with strict employment protection regulations by OECD standards and where all employees are, at least on paper, subject to collective bargaining. Based on a representative survey of employees in the private sector, an exam of collective agreements and case law, we find that in Italy i) collective agreements play no role in regulating the use of NCCs while the law specifies only the formal requirements, ii) about 16% of private sector employees are currently bound by a NCC, iii) NCCs are relatively frequent among low educated employees in manual and elementary low paid occupations having no access to any type of confidential information, and iv) in addition to NCCs, a number of other arrangements limit the post-employment activity of workers. Many of the NCCs do not comply with the minimum requirements established by law and yet workers do not consider them as unenforceable and appear to behave as they were effective. Even when NCCs are unenforceable they appear to negatively affect wages when they are introduced without changing the tasks of the workers involved. Normative implications are discussed in the last section of the paper.

Keywords: non-compete clauses, monopsony, labour market concentration

JEL Classification: J31, J41, J42, L40

Suggested Citation

Boeri, Tito and Garnero, Andrea and Garnero, Andrea and Luisetto, Lorenzo Giovanni, Non-Compete Agreements in a Rigid Labour Market: The Case of Italy. IZA Discussion Paper No. 16021, Available at SSRN: https://ssrn.com/abstract=4396108 or http://dx.doi.org/10.2139/ssrn.4396108

Tito Boeri (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Andrea Garnero

Organization for Economic Co-Operation and Development (OECD) ( email )

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Paris Cedex 16, 75775
France

Paris School of Economics (PSE) ( email )

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Paris, 75014 75014
France

Université Libre de Bruxelles (ULB) ( email )

CP 132 Av FD Roosevelt 50
Brussels, Brussels 1050
Belgium

Lorenzo Giovanni Luisetto

University of Michigan ( email )

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