Three Essays on Covenants Not to Compete.

Abstract

Covenants not to compete are contracts between an employer and an employee that prohibit the employee from joining a competing firm for a fixed amount of time after separating from the employer. The three articles contained in this thesis examine the incidence of noncompete contracts and the impact of different state-level noncompete enforcement policies, which vary from non-enforcement to enforcement even if the employee is fired. Chapter I examines the impact of noncompete enforcement policies on the willingness of firms to provide training for their employees. Chapter II examines the impact of noncompete enforcement policies on the creation, growth, and survival of new firms, taking into account differential effects for firms categorized as within-industry spinouts. Chapter III presents evidence from a new survey on the incidence of noncompetes across a broad array of employee-level and firm-level variables, including occupation, industry, education, and earnings. Together, these papers demonstrate the ubiquity of noncompetes and the large effects that state-level noncompete enforcement policies have on both workers and firms.