{"id":49,"date":"2025-05-06T07:43:39","date_gmt":"2025-05-06T11:43:39","guid":{"rendered":"https:\/\/people.bsu.edu\/econbriefs\/?p=49"},"modified":"2025-05-06T07:44:19","modified_gmt":"2025-05-06T11:44:19","slug":"by-dr-cecil-bohanon-and-dr-john-horowitz","status":"publish","type":"post","link":"https:\/\/people.bsu.edu\/econbriefs\/2025\/05\/06\/by-dr-cecil-bohanon-and-dr-john-horowitz\/","title":{"rendered":"The Two-Handed Case on Non-Competes \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"},"content":{"rendered":"<p><a href=\"https:\/\/www.economist.com\/buttonwoods-notebook\/2010\/06\/07\/one-armed-economists\"><span data-contrast=\"none\">President Truman famously asked to be sent a one-armed economist, having tired of his economic advisor proclaiming, \u201cOn the one hand, this\u201d and &#8220;On the other hand, that.&#8221;<\/span><\/a><span data-contrast=\"auto\">\u00a0 Unfortunately, most public policy issues involve economic trade-offs. The economics of employer-employee non-compete clauses are yet another example.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Several States and the Federal government have considered or are considering restricting or banning non-compete agreements. Under these agreements, employees typically agree not to start a company or accept a job in a similar line of work that competes with their original employer.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">On one hand, non-compete agreements protect firms&#8217; investment in intellectual property and proprietary development. Firms spend a lot of time, effort, and financial resources developing business processes, cultivating customers, refining products, and fine-tuning marketing plans. Employees may join competitors or form competing firms, using their knowledge of the original firm&#8217;s investment. Non-compete clauses incentivize firms to make these investments and invest in current employees.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">On the other hand, competition in both product and labor markets is at the heart of a free-enterprise system and is the basis of many of its benefits. Non-compete agreements reduce employee mobility and can suppress wages. Firms may also have more difficulty competing for quality employees because of non-compete agreements. Less competition may increase product prices, harming consumers. To reduce competition, employers may also write non-compete agreements that restrict employee freedom well beyond what is required to protect employer intellectual property.<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=3513639\"><span data-contrast=\"none\">About 18% of workers in the United States are bound by non-compete agreements<\/span><\/a><span data-contrast=\"auto\">. Interestingly, the rate is similar in states like California that don&#8217;t enforce non-compete agreements.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">What do recent studies show about the economic impact of non-compete agreements? Non-compete agreements reduce mobility and increase employees&#8217; job tenure. Some studies find that non-compete agreements decrease wages since employees have fewer other job options. Other studies find that non-compete agreements increase wages since workers become more productive.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/www.sciencedirect.com\/science\/article\/abs\/pii\/S0048733314001814\"><span data-contrast=\"none\">Marx et al. (2015) found<\/span><\/a><span data-contrast=\"auto\"> that non-compete agreements cause a brain drain away from states with non-compete agreements to states where such agreements are not enforceable. They also found that the most productive and collaborative workers are the most likely to move. <\/span><a href=\"https:\/\/pubsonline.informs.org\/doi\/full\/10.1287\/orsc.2021.1506\"><span data-contrast=\"none\">Another study<\/span><\/a><span data-contrast=\"auto\"> finds that non-compete agreements discourage women from leaving their current employer or hiring talent for high-growth startups. The authors hypothesize that women are more risk-averse and more likely to want to avoid potential litigation.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">We are two armed economists; non-compete agreements reduce competition and can protect employers\u2019 intellectual property.\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>President Truman famously asked to be sent a one-armed economist, having tired of his economic advisor proclaiming, \u201cOn the one hand, this\u201d and &#8220;On the other hand, that.&#8221;\u00a0 Unfortunately, most public policy issues involve economic trade-offs. The economics of employer-employee non-compete clauses are yet another example.\u00a0 Several States and the Federal government have considered or [&hellip;]<\/p>\n","protected":false},"author":112,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[328],"tags":[530,303,525,147,524,527,528,526,175,531,529,386],"class_list":["post-49","post","type-post","status-publish","format-standard","hentry","category-career","tag-brain-drain","tag-competition","tag-economic-trade-offs","tag-economics","tag-economist","tag-intellectual-property","tag-mobility","tag-non-compete-clauses","tag-president-truman","tag-startup","tag-tenure","tag-wages"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Two-Handed Case on Non-Competes \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/people.bsu.edu\/econbriefs\/2025\/05\/06\/by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Two-Handed Case on Non-Competes \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\" \/>\n<meta property=\"og:description\" content=\"President Truman famously asked to be sent a one-armed economist, having tired of his economic advisor proclaiming, \u201cOn the one hand, this\u201d and &#8220;On the other hand, that.&#8221;\u00a0 Unfortunately, most public policy issues involve economic trade-offs. 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