Locked In? The Enforceability of Covenants Not to Compete and the Careers of High-Tech Workers

Natarajan Balasubramanian, Jin Woo Chang, Mariko Sakakibara, Jagadeesh Sivadasan, Evan Starr

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

We study the relationship between the enforceability of covenants not to compete (CNCs) and employee mobility and wages. We exploit a 2015 CNC ban for technology workers in Hawaii and find that this ban increased mobility by 11 percent and new-hire wages by 4 percent. We supplement the Hawaii evaluation with a cross-state analysis using matched employeremployee data. We find that eight years after starting a job in an averageenforceability state, technology workers have about 8 percent fewer jobs and 4.6 percent lower cumulative earnings relative to equivalent workers starting in a nonenforcing state. These results are consistent with CNC enforceability increasing monopsony power.

Original languageEnglish (US)
Pages (from-to)S349-S396
JournalJournal of Human Resources
Volume57
Issue numberSpecialIssue 1
DOIs
StatePublished - Apr 2022
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics
  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

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