Clause and Effect: Theory and Field Experimental Evidence on Noncompete Clauses

Bo Cowgill (), Brandon Freiberg () and Evan Starr ()
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Bo Cowgill: University of Toronto
Brandon Freiberg: INSEAD
Evan Starr: University of Maryland

No 18820, IZA Discussion Papers from IZA Network @ LISER

Abstract: We study worker noncompete clauses in a large field experiment with two finance firms. Across ~14,000 job offers to freelance recruiters on short-term contracts, we randomize wages and the presence, salience, and duration of noncompetes (all contracts also included a nondisclosure agreement). Removing a noncompete increases mobility between competing employers by 36--52% and raises workers' total earnings from the two firms by 12--17%. We find no evidence---rejecting even small effects---that removing noncompetes generates secret leakage. We also find no evidence that workers choose noncompete jobs for higher pay. Many workers appear unaware of noncompetes before firms' post-employment communication. The results align with a model of inattention and uncertainty about enforcement.

Keywords: noncompete clauses; earnings; knowledge diffusion; mobility; contracting; inattention; enforcement risk (search for similar items in EconPapers)
JEL-codes: C93 J31 J41 J42 K31 L41 M5 (search for similar items in EconPapers)
Date: 2026-07
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