AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Noncompete Agreements and Bargaining Power
AEA Papers and Proceedings
(pp. 267–272)
Abstract
Noncompete agreements (NCs) present a trade-off between firm investment incentives and allocative efficiency. We illustrate this trade-off using a contract choice model in which NCs encourage industry-specific investments and wages are determined by bargaining. When worker bargaining power is sufficiently high, the NC and no-NC contracts are identical, as neither contract yields firm-provided investments. When firms have all the bargaining power, NCs encourage industry-specific investments but lower wage growth. Empirically, the wage gains from NCs are driven by nonnegotiators, aligning with our model's interpretation that NCs encourage firms to provide transferable skills when they have substantial bargaining power.Citation
Gopal, Bhargav, Xiangru Li, and Luke Rawling. 2026. "Noncompete Agreements and Bargaining Power." AEA Papers and Proceedings 116: 267–272. DOI: 10.1257/pandp.20261077Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- J22 Time Allocation and Labor Supply
- J23 Labor Demand
- J31 Wage Level and Structure; Wage Differentials
- J62 Job, Occupational, and Intergenerational Mobility; Promotion