AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
The Effect of Noncompete Enforceability on Productivity: Evidence from a New State-Level Manufacturing Dataset
AEA Papers and Proceedings
(pp. 256–261)
Abstract
Roughly 20 percent of US workers have noncompete agreements (NCAs), restricting their ability to join or form competing firms after separating from their employer. While there is now evidence that stricter NCA enforceability reduces wages, effects on productivity are a priori unclear. Enforcing NCAs might lower productivity by discouraging worker effort, creating mismatch in labor markets, or reducing innovation and entrepreneurship. Alternatively, enforcing NCAs might increase productivity by encouraging firm investment. We estimate the net effect of legal NCA enforceability on productivity by introducing a novel dataset on state-level manufacturing.Citation
Chang, Katherine, Matthew Johnson, Kurt Lavetti, Michael Lipsitz, and Devesh Raval. 2026. "The Effect of Noncompete Enforceability on Productivity: Evidence from a New State-Level Manufacturing Dataset." AEA Papers and Proceedings 116: 256–261. DOI: 10.1257/pandp.20261075Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D33 Factor Income Distribution
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- L60 Industry Studies: Manufacturing: General
- R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics