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Theory and Evidence on Employer Collusion in the Franchise Sector

Author

Listed:
  • Krueger, Alan B.

    () (Princeton University)

  • Ashenfelter, Orley

    () (Princeton University)

Abstract

In this paper we study the role of covenants in franchise contracts that restrict the recruitment and hiring of employees from other units within the same franchise chain in suppressing competition for workers. Based on an analysis of 2016 Franchise Disclosure Documents, we find that "no-poaching of workers agreements" are included in a surprising 58 percent of major franchisors' contracts, including McDonald's, Burger King, Jiffy Lube and H&R Block. The implications of these no-poaching agreements for models of oligopsony are also discussed. No-poaching agreements are more common for franchises in low-wage and high-turnover industries.

Suggested Citation

  • Krueger, Alan B. & Ashenfelter, Orley, 2018. "Theory and Evidence on Employer Collusion in the Franchise Sector," IZA Discussion Papers 11672, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11672
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    References listed on IDEAS

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    1. David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 205-240, October.
    2. Daron Acemoglu & Pascual Restrepo, 2017. "Robots and Jobs: Evidence from US Labor Markets," Boston University - Department of Economics - Working Papers Series dp-297, Boston University - Department of Economics.
    3. Dansby, Robert E & Willig, Robert D, 1979. "Industry Performance Gradient Indexes," American Economic Review, American Economic Association, vol. 69(3), pages 249-260, June.
    4. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-1087, December.
    5. Daron Acemoglu & Pascual Restrepo, 2017. "Robots and Jobs: Evidence from US Labor Markets," NBER Working Papers 23285, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Kevin Rinz, 2018. "Labor Market Concentration, Earnings Inequality, and Earnings Mobility," CARRA Working Papers 2018-10, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Keywords

    collusion; no-poaching agreement; monopsony; oligopsony; franchise;

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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