Who benefits from removing restrictions in labor mobility?
68 Pages Posted: 27 Jul 2018 Last revised: 5 Dec 2023
Date Written: June 14, 2023
Abstract
Using the extent to which firms rely on knowledge workers, we find significant cross-sectional variation in the distribution of outcomes across workers and firms after non-compete enforcement weakens. While lower enforceability may expose firms to greater hold-up problems, it potentially facilitates labor reallocation and incentivizes workers to be more productive. We find that weaker enforceability results in larger increases in profitability, valuation, productivity, and plant-level growth for knowledge-worker-intensive firms, while increasing aggregate dispersion across firms and workers, owing to increased sorting and better matching. States reducing non-compete enforceability see greater performance dispersion across knowledge-worker-intensive firms, and higher wage gains among knowledge workers.
Keywords: Allocative Efficiency, Firm Performance, Knowledge Workers, Non-competes, Labor Mobility, Productivity and Growth
JEL Classification: D61, G30, J24, J31, J41, J61, K31, O34
Suggested Citation: Suggested Citation