Abstract
Matt Marx and I will present a troika of papers which establish the regional mobility effects of noncompetes and investigate the personal responses of inventors to noncompete law. The first is hopefully almost done, and exploits a mistake by the Michigan legislature as a natural experiment. We use it to establish the impact of noncompetes on intra-state mobility, particularly on inventors with specialized skills (formal abstract below and paper attached). The second (with Jasjit Singh) has preliminary results, and provides weak evidence that states which enforce noncompetes suffer brain drains. The third (solo by Matt) is very much in process, and develops theory, based on field work, on how individuals deal with noncompetes.
Mobility, Skills, and the Michigan Noncompete Experiment
While prior research has considered the desirability and implications of employee mobility, less research has considered factors affecting the ease of mobility. This paper explores a legal constraint on mobility -employee noncompete agreements-by exploiting Michigan's apparently-inadvertent 1985 reversal of its enforcement policy as a natural experiment. Using a differences-in-differences approach, and controlling for changes in the auto industry central to Michigan's economy, we find that the enforcement of noncompetes indeed attenuates mobility. Moreover, noncompete enforcement decreases mobility most sharply for inventors with firm-specific skills, and for those who specialize in narrow technical fields. The results speak to the literature on mobility constraints while offering a credibly exogenous source of variation that can extend previous research.