Noncompete Agreements, Training, and Wage Competition

Noncompete Agreements, Training, and Wage Competition

 

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Rune Stenbacka

Hanken School of Economics

 

Abstract

We study the effects of noncompete contracts in an environment where firms invest in training junior workers. After obtaining employer-provided training, trained workers can choose whether to remain loyal to their initial employer or switch to the competing employer. We evaluate the effects of noncompete agreements on wages, employment, investment in training, production, profits, and total welfare.