The Effect of Noncompete Enforceability on Productivity: Evidence from a New State-Level Manufacturing Dataset

Katherine Chang, Matthew Johnson, Kurt Lavetti, Michael Lipsitz and Devesh Raval

AEA Papers and Proceedings, 2026, vol. 116, 256-261

Abstract: Roughly 20 percent of US workers have noncompete agreements (NCAs), restricting their ability to join or form competing firms after separating from their employer. While there is now evidence that stricter NCA enforceability reduces wages, effects on productivity are a priori unclear. Enforcing NCAs might lower productivity by discouraging worker effort, creating mismatch in labor markets, or reducing innovation and entrepreneurship. Alternatively, enforcing NCAs might increase productivity by encouraging firm investment. We estimate the net effect of legal NCA enforceability on productivity by introducing a novel dataset on state-level manufacturing.

JEL-codes: D24 D33 J24 J31 L60 R11 R23 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/pandp.20261075

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