Career Spillovers in Internal Labor Markets (WP-21-24)
Nicola Bianchi, Giulia Bovini, Jin Li, Matteo Paradisi, and Michael Powell
This paper studies career spillovers across workers, which arise in firms with limited promotion opportunities. The researchers exploit a 2011 Italian pension reform that unexpectedly tightened eligibility criteria for the public pension, leading to sudden, substantial, and heterogeneous retirement delays. Using administrative data on Italian private-sector workers, the analysis leverages cross-firm variation to isolate the effect of retirement delays among soon-to-retire workers on the wage growth and promotions of their colleagues. The authors find evidence of spillover patterns consistent with older workers blocking the careers of their younger colleagues, but only in firms with limited promotion opportunities.