AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Noncompetes and Firm Heterogeneity
AEA Papers and Proceedings
(pp. 262–266)
Abstract
Noncompetes often cover highly trained, high-paid workers but are also widespread in low-skill, low-pay service jobs. This paper asks where they hurt workers more. Using a dynamic monopsony job-ladder framework, we show that noncompetes depress wages by reducing competition, with potentially severe effects when adoption is widespread. The impact on wages is particularly adverse when they are used by firms with high productivity and high costs of training workers, as these are the firms with large rents. In contrast, the effects are more muted when low-rent employers use noncompetes.Citation
Gottfries, Axel, and Gregor Jarosch. 2026. "Noncompetes and Firm Heterogeneity." AEA Papers and Proceedings 116: 262–266. DOI: 10.1257/pandp.20261076Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- J23 Labor Demand
- J31 Wage Level and Structure; Wage Differentials
- J62 Job, Occupational, and Intergenerational Mobility; Promotion
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- M51 Personnel Economics: Firm Employment Decisions; Promotions