No-Poaching Clauses in Franchise Contracts, Anticompetitive or Efficiency Enhancing?

No–poaching clauses (NPCs) have recently come under scrutiny due to their potentially anti–competitive impact on wages. However they can also enhance efficiency. We use data from the US chain restaurant industry to assess the effect of such clauses on wages and we find robust evidence of a negative effect. Specifically, we find that the legal cases, proposed legislation, and negative attention surrounding NPCs, which led many chains to remove such clauses from their contracts, caused wages in those chains to rise by 5–6% relative to chains that never imposed NPCs. We attribute this effect to the removal of frictions and barriers to mobility in labor markets