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Noncompetes and Firm Heterogeneity

Author

Listed:
  • Axel Gottfries
  • Gregor Jarosch

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.

Suggested Citation

  • Axel Gottfries & Gregor Jarosch, 2026. "Noncompetes and Firm Heterogeneity," AEA Papers and Proceedings, American Economic Association, vol. 116, pages 262-266, May.
    • Handle: RePEc:aea:apandp:v:116:y:2026:p:262-266
    DOI: 10.1257/pandp.20261076
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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