| 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. |