The Impact of Restricting Labor Mobility on Corporate Investment and Entrepreneurship

Jessica S Jeffers

The Review of Financial Studies, 2024, vol. 37, issue 1, 1-44

Abstract: This paper examines how labor mobility restrictions like noncompete agreements affect firms’ investment decisions. Using matched employee-employer data from LinkedIn, I show that increases in the enforceability of noncompete agreements lead to widespread declines in employee departures, specifically in knowledge-intensive occupations. Established firms that rely more on these knowledge-intensive occupations increase their investment rate in physical capital. However, new firm entry in corresponding sectors declines. I provide evidence for different mechanisms to explain these patterns. Together, the findings show that labor frictions play an important role in investment decisions.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

JEL-codes: E22 J24 J41 J62 K31 L26 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhad054 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:37:y:2024:i:1:p:1-44.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().