Employer market power in Silicon Valley

Abstract Adam Smith alleged that employers often secretly combine to reduce labour earnings. This paper examines an important case of such behavior: no-poaching agreements through which information-technology companies agreed not to compete for each other’s workers. Exploiting the plausibly exogenous timing of a US Department of Justice investigation, I estimate the effects of these agreements using a difference-in-differences design. Data from Glassdoor permit the inclusion of rich employer- and job-level controls. On average the no-poaching agreements reduced salaries at colluding firms by 5.6%, consistent with considerable employer market power. Stock bonuses and job satisfaction were also negatively affected.