Noncompete Agreements, Training, and Wage Competition
34 Pages Posted: 5 Jan 2022 Last revised: 5 Oct 2022
Date Written: October 4, 2022
Abstract
We study the effects of noncompete agreements in an environment where firms invest in training junior workers. After obtaining employer-provided training, trained workers can choose whether to remain loyal to their initial employer or switch to the competing employer. We evaluate the effects of noncompete agreements on wages, employment, investment in training, production, profits, and total welfare. Firms earn higher profits and pay lower average wage when they require workers to sign noncompete agreements.
Keywords: Noncompete agreements, wage competition, on-the-job training, labor law, switching costs
JEL Classification: J41, J31, K31, L4, M53
Suggested Citation: Suggested Citation