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

Author

Listed:
  • Cowgill, Bo

    (University of Toronto)

  • Freiberg, Brandon

    (INSEAD)

  • Starr, Evan

    (University of Maryland)

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

  • Cowgill, Bo & Freiberg, Brandon & Starr, Evan, 2026. "Clause and Effect: Theory and Field Experimental Evidence on Noncompete Clauses," IZA Discussion Papers 18820, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18820
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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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