On the inefficiency of non‐competes in low‐wage labour markets
Tristan Potter,
Bart Hobijn,
André Kurmann
Abstract:We study the efficiency of non‐compete agreements (NCAs) in an equilibrium model of labour turnover. The model is consistent with empirical studies showing that NCAs reduce turnover and average wages for low‐wage workers. The model also predicts that, by reducing turnover, NCAs raise recruitment and employment. We show that optimal NCA policy: (i) is characterized by a Hosios‐like condition that balances the benefits of higher employment against the costs of inefficient congestion and poaching; (ii) depends cr… Show more
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