1 Mobility , Skills , and the Michigan Noncompete Experiment

While prior research has considered the desirability and implications of employee mobility, less research has considered factors affecting the ease of mobility. This paper explores a legal constraint on mobility —employee noncompete agreements—by exploiting Michigan's apparently-inadvertent 1985 reversal of its enforcement policy as a natural experiment. Using a differences-indifferences approach, and controlling for changes in the auto industry central to Michigan's economy, we find that the enforcement of noncompetes indeed attenuates mobility. Moreover, noncompete enforcement decreases mobility most sharply for inventors with firm-specific skills, and for those who specialize in narrow technical fields. The results speak to the literature on mobility constraints while offering a credibly exogenous source of variation that can extend previous research.