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Noncompete Agreements in the US Labor Force

Evan P. Starr, J.J. Prescott and Norman D. Bishara

Journal of Law and Economics, 2021, vol. 64, issue 1, 53 - 84

Abstract: Using nationally representative survey data on 11,505 labor force participants, we examine the use and implementation of noncompete agreements and the employee outcomes associated with these provisions. Approximately 18 percent of labor force participants are bound by noncompetes, with 38 percent having agreed to at least one in the past. Noncompetes are more likely to be found in high-skill, high-paying jobs, but they are also common in low-skill, low-paying jobs and in states where noncompetes are unenforceable. Only 10 percent of employees negotiate over their noncompetes, and about one-third of employees are presented with noncompetes after having already accepted job offers. Early-notice noncompetes are associated with better employee outcomes, while employees who agree to late-notice noncompetes are comparatively worse off. Regardless of noncompete timing, however, wages are relatively lower where noncompetes are easier to enforce. We discuss these findings in light of competing theories of the economic value of noncompetes.

Date: 2021
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