Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85018
Authors: 
Bünstorf, Guido
Engel, Christoph
Fischer, Sven
Güth, Werner
Year of Publication: 
2013
Series/Report no.: 
Jena Economic Research Papers 2013-038
Abstract: 
We experimentally test the effect of enforceable non-compete clauses on working efforts. The employee can invest into the probability of making a profitable innovation. After a successful innovation (Win) the employee may want to leave the firm (Shift) whereas after an innovation failure (Lose) he may remain (Stay) . In the treatments with non-compete clause, but not in the baseline, the employer can prevent successful innovators from leaving the firm. With standard preferences, effort should be lower if the worker cannot leave the firm, except if compulsory compensation for having to stay is very high. By contrast we find no reduction in effort even if compensation is low. Employers anticipate the incentive problem and pay a higher wage which employees reciprocate by higher effort.
Subjects: 
fairness
labor relations
non compete clause
non compete covenant
reciprocity
JEL: 
L51
D21
J33
J38
Document Type: 
Working Paper

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