Older Workers, Pension Reforms and Firm Outcomes

55 Pages Posted: 23 Mar 2024

See all articles by Francesca Carta

Francesca Carta

Bank of Italy

Francesco D’Amuri

Bank of Italy

Till Von Wachter

University of California, Los Angeles (UCLA) - Department of Economics

Abstract

Using Italian matched worker-firm data, this paper quantifies the effect of an exogenous increase in older workers driven by an unexpected raise in statutory retirement ages on medium and large firms' input mix and economic outcomes. Data on lifetime pension contributions are used to calculate the expected additional number of older workers retained by each firm due to the pension reform. Instrumental variable estimates show an increase in older workers leads to a precisely estimated rise in employment of younger workers, value added, and total labor costs at constant average labor productivity and unit labor costs. The findings prove that medium and large firms are able to accommodate the firm-level labor supply shock by expanding their size with no adverse effects on productivity, and likely creating complementary jobs filled by younger workers.

Keywords: Pension reform, older workers' employment, firm outcomes.

Suggested Citation

Carta, Francesca and D’Amuri, Francesco and Von Wachter, Till, Older Workers, Pension Reforms and Firm Outcomes. Available at SSRN: https://ssrn.com/abstract=4769816 or http://dx.doi.org/10.2139/ssrn.4769816

Francesca Carta (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Francesco D’Amuri

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Till Von Wachter

University of California, Los Angeles (UCLA) - Department of Economics ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

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