Dynamic Monopsony with Large Firms and Noncompetes

Axel Gottfries and Gregor Jarosch

No 31965, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E0 J0 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-com, nep-lab and nep-reg
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