Book Description

The first chapter 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 patent records to matched employer-employee administrative data at the U.S. Census Bureau, I document that inventors diffuse knowledge across firms and are compensated for knowledge diffusion. Constructing novel microdata, 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 aggregate growth rate and 9% of welfare. Optimal regulation of non-compete contracts balances the innovation-diffusion tradeoff. The second chapter (joint with Martin Ganco, Haifeng Wang and Shotaro Yamaguchi) studies the strategic use of non-compete agreements. Extant work in strategic management has focused on the role of noncompete agreements (NCAs) - a form of restrictive legal lever used by firms when managing human capital - and conceptualized them as being advantageous to firms. Challenging this notion, we highlight a novel downside of using NCAs and show how their use by some firms creates differentiation opportunities for rival firms. We analyze a unique survey dataset to examine the heterogeneity in the firms' actual use of NCAs conditional on industry and state. We find that the nonuse of NCAs is more common among firms that rely more heavily on talent and are also not the industry leaders, and such firms are more likely not to use NCAs with the goal of attracting skilled employees. The third chapter develops a structural model of pre-college educational investment in college admission tournaments. Students are heterogeneous in ability, family wealth, and preferences for colleges and can purchase tutoring services to improve their human capital and test scores. They also face borrowing constraints. The score distribution, admission thresholds, and college assignment are joint equilibrium outcomes. The model is estimated with Korean ELS: 2005 data and can be used to study Korea's tutoring market with a wide range of policy candidates, including taxing private tutoring and reducing noise in admission. A tax lowers the overall spending on tutoring. The students from middle-income families are most responsive to the price change. Reduced signal noise incentivizes the tutoring expenditure of high-ability students and improves their chances of attending prestigious colleges.