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PRICE‐PARITY ADJUSTMENTS SHOULDN'T BE A TRADE SECRET: STATE‐LEVEL PRICE PARITY AND ASSESSMENT OF COVENANTS NOT TO COMPETE ENFORCEABILITY
Contemporary Economic Policy  (IF0.943),  Pub Date : 2020-08-18, DOI: 10.1111/coep.12496
Laurel J. Fish, Dennis Halcoussis, G. Michael Phillips

This paper demonstrates the importance of making regional cost adjustments and questions the validity of papers using nationwide compensation to assess noncompete enforceability and other policies without regional price‐level adjustments. Numerous papers in recent years do not incorporate the cross‐sectional analog to inflation adjustments. Using the Bureau of Economic Analysis Regional Price Parity (RPP) index, the results of a representative policy analysis study are analyzed with, and without, parity adjustment. We show that typical results demonstrating broad negative economic effects from noncompete covenants may be an artifact of using nominal, nonparity‐adjusted data. (JEL C18, R1, J31)