Events

Miss Jingnan (Jane) Liu
Ph.D. Candidate in Economics
University of Wisconsin-Madison

This paper studies how endogenous worker mobility affects inter-firm knowledge
diffusion, innovation, and economic growth. I propose a framework combining endogenous
growth and on-the-job search. Firms grow knowledge by in-house innovation and
by hiring workers from more productive firms. Knowledge is nonrival, leading to underinvestment
in innovation. Non-compete contracts address this underinvestment by
allowing innovating firms to enforce buyout payments when they lose workers. However,
they discourage diffusion by deterring firm entry. Linking administrative data on patents,
firm performance, employment history, and wages from the U.S. Census Bureau, I document
that inventors diffuse knowledge across firms and are compensated for knowledge
diffusion. Constructing novel micro-level data, I find non-compete contracts are associated
with increased innovation expenditure and decreased worker mobility. I calibrate
my theoretical model to match the empirical results. Knowledge diffusion, through the
channel of worker mobility, accounts for 4% of the TFP growth rate and 8% of welfare.
Optimal regulation of non-compete contracts balances the innovation-diffusion tradeoff.