I analyze the effect of non-compete agreements (NCAs) on career trajectories of inventors in the US. NCAs constrain the within-industry employment choice set of inventors. I show causal effects that 1.5 in 100 inventors annually bypass their NCAs by moving to new employers in more distant product markets. Reallocated inventors are subsequently less productive. Inventors move to new employers who are less reliant on NCAs and there is a lower quality match between inventors and their new employers. Firms affected by labor outflows grow less whereas firms with labor inflows grow more. I highlight regulatory frictions which lead to unintended detrimental reallocation of human capital in the economy.
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Last revised: 17 Mar 2023
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