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Clause and Effect: Theory and Field Experimental Evidence on Noncompete Clauses

Author

Listed:
  • Bo Cowgill
  • Brandon Freiberg
  • Evan Starr

Abstract

We study worker noncompete clauses in a large field experiment with two finance firms. Across ~14,000 job offers to freelance recruiters on short-term contracts, we randomize wages and the presence, salience, and duration of noncompetes (all contracts also included a nondisclosure agreement). Removing a noncompete increases mobility between competing employers by 36—52% and raises workers' total earnings from the two firms by 12—17%. We find no evidence — rejecting even small effects — that removing noncompetes generates secret leakage. We also find no evidence that workers choose noncompete jobs for higher pay. Many workers appear unaware of noncompetes before firms' post-employment communication. The results align with a model of inattention and uncertainty about enforcement.

Suggested Citation

  • Bo Cowgill & Brandon Freiberg & Evan Starr, 2026. "Clause and Effect: Theory and Field Experimental Evidence on Noncompete Clauses," CESifo Working Paper Series 12846, CESifo.
    • Handle: RePEc:ces:ceswps:_12846
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    References listed on IDEAS

    as
    1. Evan Starr & J J Prescott & Norman Bishara, 2020. "The Behavioral Effects of (Unenforceable) Contracts† [“Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools]," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 36(3), pages 633-687.
    2. Evan P. Starr & J.J. Prescott & Norman D. Bishara, 2021. "Noncompete Agreements in the US Labor Force," Journal of Law and Economics, University of Chicago Press, vol. 64(1), pages 53-84.
    3. Michael Lipsitz & Evan Starr, 2022. "Low-Wage Workers and the Enforceability of Noncompete Agreements," Management Science, INFORMS, vol. 68(1), pages 143-170, January.
    4. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    5. James Heckman, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    6. Matthew S. Johnson & Kurt Lavetti & Michael Lipsitz, 2025. "The Labor Market Effects of Legal Restrictions on Worker Mobility," Journal of Political Economy, University of Chicago Press, vol. 133(9), pages 2735-2793.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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