Who benefits from removing restrictions in labor mobility?

68 Pages Posted: 27 Jul 2018 Last revised: 5 Dec 2023

See all articles by Zhaozhao He

Zhaozhao He

University of New Hampshire - Department of Accounting & Finance

M. Babajide Wintoki

University of Kansas - School of Business

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

He, Zhaozhao and Wintoki, Modupe Babajide, Who benefits from removing restrictions in labor mobility? (June 14, 2023). Available at SSRN: https://ssrn.com/abstract=3209480 or http://dx.doi.org/10.2139/ssrn.3209480

Zhaozhao He

University of New Hampshire - Department of Accounting & Finance ( email )

Durham, NH 03824
United States
603-862-3355 (Phone)

HOME PAGE: http://sites.google.com/site/zhaozhaohe

Modupe Babajide Wintoki (Contact Author)

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

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