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Thor Berger . Photo

Thor Berger

Associate senior lecturer

Thor Berger . Photo

Regional technological dynamism and noncompete clauses : Evidence from a natural experiment

Author

  • Thor Berger
  • Carl Benedikt Frey

Summary, in English

In this paper, we examine the causal impact of enforceable covenants not to compete (CNCs) on labor market matching and the technological dynamism of regions. Exploiting the fact that the Michigan Antitrust Reform Act (MARA) of 1985 inadvertently repealed Michigan' s prohibition on CNC enforcement, we show that technical professionals in Michigan became increasingly likely to switch industry relative to similar workers in other U.S. states after prohibition. Workers switching industries after the introduction of MARA also earned lower wages, implying that they shifted into technical fields where their skills from previous employment were less productive. Estimates further show that the technological dynamism of Michigan declined in tandem, as fewer workers shifted into new types of jobs associated with recent technological advances. These findings are consistent with the view that skilled professionals that are subject to CNCs are more likely to leave their field of work postemployment to avoid lawsuits.

Department/s

  • Department of Economic History

Publishing year

2017-09

Language

English

Pages

655-668

Publication/Series

Journal of Regional Science

Volume

57

Issue

4

Document type

Journal article

Publisher

Halifax

Topic

  • Economic Geography

Status

Published

ISBN/ISSN/Other

  • ISSN: 0022-4146