Regional disadvantage? Employee non-compete agreements and brain drain

Abstract

A growing body of research has documented the local impact of employee non-compete agreements, but their effect on interstate migration patterns remains unexplored. Exploiting an inadvertent policy reversal in Michigan as a natural experiment, we show that non-compete agreements are responsible for a “brain drain” of knowledge workers out of states that enforce such contracts to states where they are not enforceable. Importantly, this effect is felt most strongly on the margin of workers who are more collaborative and whose work is more impactful. Keywords: Non-compete agreements; Labor mobility; Regional economics