Career Spillovers in Internal Labour Markets

Abstract

This paper studies career spillovers across workers, which arise in firms with limited promotion opportunities. We 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. We find evidence of spillover patterns consistent with older workers blocking the careers of their younger colleagues, but only in firms with limited promotion opportunities.

Transitory Earnings Opportunities and Educational Scarring of Men

“…Consistent with that notion,Bianchi, Bovini, Li, Paradisi, and Powell (2021) find that delayed retirement among soon-to-retire Italian workers in response to a pension reform reduces the wage growth and promotions of their younger colleagues.…”

The Organizational Demography of the Qing Civil Service, 1830-1912

“…In a system where the number of regular positions with formal appointments was stable, the long-term decline in exit rates would have reduced the numbers of appointments available for aspiring officials. Declines in the exit rates of higher-ranked officials would also have further reduced the already limited opportunities for advancement for lowerranked officials (Bianchi et al 2023). This was on top of pressures already being generated by increases in the numbers of holders of purchased degrees who were competing for office.…”

“…One line of research emphasizes the influence of the composition of an organization in terms of length of service and other attributes on such outcomes as diversity, ability to adapt and innovate, formation of cliques based on entrance year, and employees' mobility expectations and/or aspirations (Pfeffer 1983(Pfeffer , 1985. One recent empirical finding directly relevant to our analysis is that in organizations like the Qing bureaucracy that have only limited opportunities for internal promotion, reductions in the exit rates of the most senior employees diminish the prospects of their junior colleagues (Bianchi et al 2023). Another line of research considers the interaction of the populations of employees and positions and focuses on how job vacancies interact with the circulation of employees within the organization (Stewman and Konda 1983;Stewman 1986).…”

“…Since there was no increase in the number of mid-ranked or lower-ranked officials competing for promotion, only a reduction in the number of vacancies at higher ranks implied by the trends in Figures 2 and 3 could have led to situations like the one that Wang Shufen faced. As Bianchi et al (2023) demonstrated in a study of contemporary Italian organizations following an increase in the retirement age, reductions in the exit rates of high-ranked officials would have had disproportionate impact on the prospects for promotion of lower-ranked officials.…”

Health and labor market effects of an unanticipated rise in retirement age. Evidence from the 2012 Italian pension reform

“…In this way, we provide insights on the effect of both drastic and more gradual increases of pension age on health, while discarding any anticipation effects. Fourth, while the 2011 Italian reform has been previously studied vis-à-vis some labor market outcomes such as sick leave (Brunello et al, 2023;Moscarola et al, 2016), old-young worker substitution (Bertoni & Brunello, 2021; and spillovers on co-workers (Bianchi et al, 2021;Carta & De Philippis, 2021), this is the first study to look at the health, employment and program substitution effects of the Italian reform on the workers directly affected by the reform, investigating a rich set of previously unexplored outcomes.…”