Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223856
Authors: 
Can, Ege
Fossen, Frank M.
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13414
Abstract: 
The economic effects of non-compete agreements have received increasing attention from academics and policymakers. This paper investigates how non-compete policies affect different types of self-employment. We exploit policy reforms in Utah and Massachusetts in 2016 and 2018, which decreased the enforceability of non-compete covenants, as quasi-experiments. We separate self-employment into self-employment with incorporated businesses (as a proxy for entrepreneurship) and self-employment with unincorporated businesses. Using representative individual-level data from the American Community Survey and the Current Population Survey, we estimate the probability of being self-employed with these different types of businesses, as well as entry into self-employment, and how these probabilities changed due to the reforms. Our findings show that the decrease in the enforceability of non-compete agreements in the two states resulted in a higher rate of incorporated self-employment in these states. In contrast, there was no sizable effect on the rate of unincorporated self-employment. Our results imply that states can promote entrepreneurial activity by reducing the enforceability of non-compete agreements.
Subjects: 
incorporated
non-compete agreements
entrepreneurship
unincorporated
JEL: 
L26
O38
J23
Document Type: 
Working Paper

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