Max Planck Institute for Innovation and Competition, Munich, Room 313
Promotions are an important component of a worker’s wage. Yet, traditional theories about the factors driving career progressions typically focus on worker-level characteristics like human capital acquisition, on learning, or on broad market-level factors like labor supply and demand. We study coworker-career spillovers that arise in firms with limited promotion opportunities. We exploit a 2011 Italian pension reform that tightened eligibility criteria for the public pension. We use administrative data on Italian private-sector and leverage cross-firm variation to isolate the effect of retirement delays among soon-to-retire workers on the promotions of their colleagues. We find evidence of career spillovers, and the patterns of these spillovers are consistent with the idea that older workers block the careers of their younger colleagues in firms with limited opportunities. Delays in retirement lead to a decrease in younger workers’ wage growth. Promotions from blue to white-collar positions fall in response to retirement delays among white-collar workers, whereas there is no effect of such delays among blue-collars. The effects are largest in firms with shrinking employment in the years leading up to the policy and negligible among fast-growing firms. We derive in a model the key features necessary to explain our results (with Giulia Bovini, Jin Li, Mateo Paradisi, and Michael Powell).
Contact Person: Dr. Rainer Widmann