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Noncompete covenants or covenant not to compete (CNC) are clauses in employment contracts in which the employee agrees not to gain employment with a competitor firm. In this article, we study the efficiency aspects of such contracts by incorporating the effect of labor mobility restrictions on knowledge transfer across firms, investment decisions by firms, and investment by workers. Following research that shows state-wise variations in the degree of CNC enforcement, we allow the strength of CNC enforcement to vary as a matter of regulatory policy and derive the optimal strength of enforcement. We also look at how regulations around CNCs should be optimally designed when employers can use collusive agreements, such as 'no poaching' agreements, as an alternative to noncompete clauses. Given recent allegations of employer collusion among large Silicon Valley firms, we argue for a cautious approach in designing policies on CNC enforcement. (JEL J24, J41, J63, K31), I. INTRODUCTION As knowledge-intensive industries have grown in importance in the last few decades, several recent studies have focused on the role of worker mobility as an important conduit through [...]

We show that a seemingly paradoxical result is possible--an increase in one's wage can reduce one's welfare. Such outcome can occur in an economy populated by agents who value a private good bought using labor income and a public good produced by voluntary time contributions. A raise in the wage (in general, opportunity cost of time) makes each agent substitute away from contributing to the public good, failing to internalize the negative externality imposed on others. The result is a decrease in public good provision. Under quite general conditions, the implied cumulative negative effect on agents' welfare can more than offset the positive effect of the wage raise from increased private good consumption and lead to an equilibrium in which all agents are worse off. Our result is particularly relevant for developing economy settings as it holds for relatively low initial wage levels. We discuss the applicability of our findings to a number of important problems in development, such as market integration, cooperation in common pool resource conservation and social capital. JEL classification: O12; D62; H41 Keywords: Private provision of public goods; Economic development; Externalities

In this paper, we study supplier-firm interactions to explain firms' outsourcing relationships. We show that in an imperfect information setup a firm learns about the quality of its suppliers through repeated interaction. As the firm determines the suppliers' quality with greater precision, it gives a greater proportion of its contracts to these 'better' suppliers. We report evidence from African manufacturing firms that is consistent with our hypothesis: both frequency and volume of transactions increase with the length of a firm's relationship with its supplier. These effects are stronger in poor contracting environments. JEL Classification: D21, D82, L20, 1. Introduction There exists a significant literature on issues relating to outsourcing in both economics and business management. (1) This literature emphasizes that organizations have limited senior managerial time and [...]

A study was conducted to illustrate how an increase in the compensation of a working male can give a paradoxical result where the family is worse off. The model used in the study pertains to wage labor, joint household activities and joint community activities. The female household member engages in household and community activities, while the male allocates time between labor and household chores.

This paper studies the innovation response of upstream technology suppliers when their downstream buyers transition from regulation to competition. By modeling the impact of the 1990s U.S. electricity deregulation on patenting, we find that after deregulation, the net competition effect (comprising the pure competition and the escape competition effect) decreased innovation by 18.3% and the appropriation effect increased innovation by 19.6%. Other deregulation factors have led to a 20.6%decline. In aggregate, after deregulation, innovation by the upstream technology suppliers has declined by 19.3%, and upstream innovation quality and generality have declined as well. [ABSTRACT FROM AUTHOR]