Full Citation

Title: Regional Technological Dynamism and Noncompete Clauses: Evidence from a Natural Experiment

Citation Type: Journal Article

Publication Year: 2017

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Abstract: In this paper, we examine the causal impact of enforceable covenants not to compete (CNCs) on labor market matching and the technological dynamism of regions. Exploiting the fact that the Michigan Antitrust Reform Act (MARA) of 1985 inadvertently repealed Michigan' s prohibition on CNC enforcement, we show that technical professionals in Michigan became increasingly likely to switch industry relative to similar workers in other U.S. states after prohibition. Workers switching industries after the introduction of MARA also earned lower wages, implying that they shifted into technical fields where their skills from previous employment were less productive. Estimates further show that the technological dynamism of Michigan declined in tandem, as fewer workers shifted into new types of jobs associated with recent technological advances. These findings are consistent with the view that skilled professionals that are subject to CNCs are more likely to leave their field of work postemployment to avoid lawsuits.

Url: http://onlinelibrary.wiley.com/doi/10.1111/jors.12305/full

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Authors: Berger, Thor; Benedikt Frey, Carl

Periodical (Full): Journal of Regional Science

Issue: 4

Volume: 57

Pages: 655-668

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

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