Working Paper: NBER ID: w31965
Authors: Axel Gottfries; Gregor Jarosch
Abstract: How do noncompete agreements between workers and firms affect wages and employment in equilibrium? We build a tractable framework of wage posting with on-the-job search and large employers that provides a natural laboratory to assess anti-competitive practices in the labor market. We characterize the impact of market structure and show that noncompetes can sharply suppress wages. We validate the quantitative model with empirical evidence on the impact of mergers and noncompetes on employment and wages. Banning noncompetes in the US would raise wages by 4%. Wage gains are large when demand is inelastic, training costs are high, and when noncompetes are widespread.
Keywords: No keywords provided
JEL Codes: E0; J0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| noncompete agreements (L49) | wages (J31) |
| ban on noncompetes (L49) | wages (J31) |
| noncompete agreements (L49) | competition (L13) |
| competition (L13) | wages (J31) |
| noncompete agreements (L49) | wage compression (J31) |
| wage compression (J31) | higher turnover costs (J63) |
| noncompete agreements (L49) | inefficiencies in worker allocation (J29) |