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The Effects of Non-Compete Agreements Enforceability on Entrepreneurship in the United States, 1995-2011

Sofer, Yotam LU (2020) EKHS11 20201
Department of Economic History
Abstract (Swedish)
Restrictions of future employment in the form of non-compete agreements (agreements that restrict an employee from joining, forming, associating, or starting a competing firm) are commonly used in the American labor market. Yet their effects on entrepreneurship is not fully understood. Specifically, the relationship between non-competes and entry of firms is somewhat neglected. Therefore, an attempt to provide additional insights on the links between NCA enforceability and entrepreneurship will be made in this work. The lack of a unitary approach to the enforcement of NCA across time and states permitted an estimation of an econometric model, utilizing this state-year variation. The datasets used in this work, covering all states between... (More)
Restrictions of future employment in the form of non-compete agreements (agreements that restrict an employee from joining, forming, associating, or starting a competing firm) are commonly used in the American labor market. Yet their effects on entrepreneurship is not fully understood. Specifically, the relationship between non-competes and entry of firms is somewhat neglected. Therefore, an attempt to provide additional insights on the links between NCA enforceability and entrepreneurship will be made in this work. The lack of a unitary approach to the enforcement of NCA across time and states permitted an estimation of an econometric model, utilizing this state-year variation. The datasets used in this work, covering all states between 1995-2011, are the Business Dynamics Statistics and the Current Population Survey. The main results of this research suggest that a shift from the lowest to the highest enforceability level holds a 3.4\% negative effect on the entry rate of firms. This effect varies across different occupations, dimensions of NCA enforceability, and metropolitan status. Alongside a humble contribution to the academic debate, this research might equip policymakers with additional knowledge regarding the effects of NCA enforceability. (Less)
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author
Sofer, Yotam LU
supervisor
organization
course
EKHS11 20201
year
type
H1 - Master's Degree (One Year)
subject
keywords
Non-compete agreements, NCA, current population survey, CPS, business dynamics statistics, DBS, Firms starts, start-ups, Silicon-Valley, Route 128, knowledge spillovers, state-year variation, Difference-in-difference
language
English
id
9021446
date added to LUP
2020-07-03 12:27:28
date last changed
2020-07-03 12:27:28
@misc{9021446,
  abstract     = {{Restrictions of future employment in the form of non-compete agreements (agreements that restrict an employee from joining, forming, associating, or starting a competing firm) are commonly used in the American labor market. Yet their effects on entrepreneurship is not fully understood. Specifically, the relationship between non-competes and entry of firms is somewhat neglected. Therefore, an attempt to provide additional insights on the links between NCA enforceability and entrepreneurship will be made in this work. The lack of a unitary approach to the enforcement of NCA across time and states permitted an estimation of an econometric model, utilizing this state-year variation. The datasets used in this work, covering all states between 1995-2011, are the Business Dynamics Statistics and the Current Population Survey. The main results of this research suggest that a shift from the lowest to the highest enforceability level holds a 3.4\% negative effect on the entry rate of firms. This effect varies across different occupations, dimensions of NCA enforceability, and metropolitan status. Alongside a humble contribution to the academic debate, this research might equip policymakers with additional knowledge regarding the effects of NCA enforceability.}},
  author       = {{Sofer, Yotam}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Effects of Non-Compete Agreements Enforceability on Entrepreneurship in the United States, 1995-2011}},
  year         = {{2020}},
}