Career Spillovers in Internal Labor Markets

Nicola Bianchi, Kellogg School of Management-Northwestern University, Giulia Bovini, Bank of Italy, Jin Li, The University of Hong Kong, Matteo Paradisi, EIEF, and Michael Powell, Kellogg School of Management-Northwestern University

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.