Collective Bargaining and Monopsony: The Regulation of Noncompete Agreements in France

ABSTRACT Can collective bargaining mitigate monopsony power? This paper studies the extent to which collective agreements regulating employee noncompete clauses affect firm‐level markdowns in French manufacturing. Using a staggered difference‐in‐differences design, we find that such regulation reduces markdowns by 1.3%–2.2% on average. The effects increase over time and are stronger among smaller, less productive, low‐wage firms. Leveraging a French Court of Cassation ruling requiring financial compensation for enforceable noncompetes, we show complementarity between national regulations and sectoral bargaining. By strengthening compliance and adding limitations, collective bargaining emerges as an effective regulatory tool shaping firms' use of noncompete agreements.