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The Impacts of Restricting Mobility of Skilled Service Workers: Evidence from Physicians

Author

Listed:
  • Kurt Lavetti
  • Carol Simon
  • William D. White

Abstract

Why do skilled services firms use noncompete agreements (NCAs), which prohibit workers from leaving firms and competing against them? We conduct a survey of physicians linking NCA use to labor-market outcomes and firm performance and show that by deterring poaching of patients NCAs increase the return to job tenure, with larger effects in states with more enforceable NCA laws. These effects are consistent with NCAs enabling practices to allocate clients to new physicians through intrafirm referrals, reducing a form of investment holdup. We discuss an array of supporting suggestive evidence, but also find NCAs provide some benefits by reducing job turnover.

Suggested Citation

  • Kurt Lavetti & Carol Simon & William D. White, 2020. "The Impacts of Restricting Mobility of Skilled Service Workers: Evidence from Physicians," Journal of Human Resources, University of Wisconsin Press, vol. 55(3), pages 1025-1067.
    • Handle: RePEc:uwp:jhriss:v:55:y:2020:i:3:p:1025-1067
    Note: DOI: 10.3368/jhr.55.3.0617-8840R5
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    File URL: http://jhr.uwpress.org/cgi/reprint/55/3/1025
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    Citations

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    Cited by:

    1. Naomi Hausman & Kurt Lavetti, 2021. "Physician Practice Organization and Negotiated Prices: Evidence from State Law Changes," American Economic Journal: Applied Economics, American Economic Association, vol. 13(2), pages 258-296, April.
    2. Evan Starr & Justin Frake & Rajshree Agarwal, 2019. "Mobility Constraint Externalities," Organization Science, INFORMS, vol. 30(5), pages 961-980, September.
    3. Evan Starr & Natarajan Balasubramanian & Natarajan Balasubramanian, 2018. "Screening Spinouts? How Noncompete Enforceability Affects the Creation, Growth, and Survival of New Firms," Management Science, INFORMS, vol. 64(2), pages 552-572, February.
    4. Lauren E. Aydinliyim, 2022. "The Case for Ethical Non-compete Agreements: Executives Versus Sandwich-Makers," Journal of Business Ethics, Springer, vol. 175(3), pages 651-668, January.
    5. Bart Hobijn & Andre Kurmann & Tristan Potter, 2022. "On the Inefficiency of Non-Competes in Low-Wage Labor Markets," Working Paper Series 2022-01, Federal Reserve Bank of San Francisco.
    6. Kurt Lavetti, 2021. "Noncompete agreements in employment contracts," IZA World of Labor, Institute of Labor Economics (IZA), pages 486-486, September.
    7. Christopher P. Clifford & William C. Gerken, 2021. "Property Rights to Client Relationships and Financial Advisor Incentives," Journal of Finance, American Finance Association, vol. 76(5), pages 2409-2445, October.
    8. Liyan Shi, 2021. "The Macro Impact of Noncompete Contracts," EIEF Working Papers Series 2103, Einaudi Institute for Economics and Finance (EIEF), revised 2021.
    9. Guimaraes, Bernardo & Cordeiro De Noronha Pessoa, Joao Paulo & Ponczek, Vladimir, 2021. "Non-compete agreements, wages and efficiency: theory and evidence from Brazilian football," LSE Research Online Documents on Economics 114417, London School of Economics and Political Science, LSE Library.
    10. Xiao, Fenglong, 2022. "Non-competes and innovation: Evidence from medical devices," Research Policy, Elsevier, vol. 51(6).

    More about this item

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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