The Effects of Non-Compete Agreements on Different Types of Self-Employment: Evidence from Massachusetts and Utah

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 13414

Classification and Topics

• Classification: Wirtschaft ; Entrepreneurship ; Technological Change: Government Policy ; Labor Demand
• Subject: incorporated ; non-compete agreements ; entrepreneurship ; unincorporated

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Can, Ege ; Fossen, Frank M.
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223856
• Last update: 10.03.2025, 11:43 AM CET