nep-spo New Economics Papers
on Sports and Economics
Issue of 2022‒04‒25
one paper chosen by
Humberto Barreto
DePauw University

  1. Non-compete agreements, wages and efficiency: theory and evidence from Brazilian football By Guimaraes, Bernardo; Pessoa, João Paulo; Ponczek, Vladimir

  1. By: Guimaraes, Bernardo; Pessoa, João Paulo; Ponczek, Vladimir
    Abstract: We propose a model to study non-compete agreements and evaluate their quantitative effects. We explore an exogenous policy change that removed non-compete clauses in the market for Brazilian footballers, the Pele Act of 1998. The Act raised players’ lifetime income but changed the wage profile in a heterogeneous way, reducing young players’ salaries. We structurally estimate the model’s parameters by matching wages and turnover profiles in the post Act period. By changing a single parameter related to the non-compete friction, we can match the changes in the age-earnings profile. We then show that the bulk of income gains is due to distributional forces, with efficiency gains playing a minor role.
    Keywords: labor mobility; labor frictions; wage profile; labor turnover
    JEL: J30 J60 K31
    Date: 2021–03–08

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