Labour market power: new evidence on Non-Compete Agreements and the effects of M&A in the UK

Julian Alves, Bruno Serra Lorenzo, Jason Greenberg, Yaxin Guo, Ravija Harjai and John van Reenen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Monopsony power is an important feature of modern labour markets. We examine its impact on workers. We report the first representative survey of Non-Compete-Agreements (NCA) in the UK and find that about 26% of workers appear to be covered, a higher fraction than in comparable surveys in the US (18%) and Italy (16%). Although NCAs are more prevalent for skilled workers, a large number of low skilled workers are also subject to NCAs (e.g. over a fifth of plant operators). Moreover, although NCAs are associated with higher training (conditional on other measures of skills), we argue that such benefits are unlikely to justify their high prevalence. Finally, we examine the impact of over 2,000 M& UK panel data between 1997 and 2022 (over 900,000 observations). The data suggests that M&A tends to reduce employment growth in the merged entity (from 3% a year prior to the merger to about zero in the subsequent five years), particularly in target firms. However, there is no evidence of any falls in average wage growth (in acquirer or target) as monopsony would predict - if anything, average wages are higher. Nor does profitability or productivity change post-merger.

Keywords: management practices; productivity; competition (search for similar items in EconPapers)
JEL-codes: L2 M2 O32 O33 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2024-01-29
New Economics Papers: this item is included in nep-com, nep-hrm and nep-reg
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Related works:
Working Paper: Labour market power: New evidence on Non-Compete Agreements and the effects of M&A in the UK (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:126835

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