No Country for Young Managers: How Age and Tenure Shape the Distribution of Italian Firms
Abstract. We study how credit is allocated over the managerial life-cycle and its aggregate consequences. Using matched Italian administrative records on firm balance sheets, top managers, and credit outcomes, we document significant age- and tenure-based credit gradients: younger and less-tenured entrepreneurs obtain less credit and face higher denial risk, despite higher average revenue product of capital. We develop a general-equilibrium heterogeneous agent model with occupational choices in which firms’ borrowing capacity evolves with managerial age and within-firm tenure. The model matches the empirical life-cycle patterns in credit and capital productivity, and implies sizeable misallocation through constrained entry and expansion of high-productivity young entrepreneurs. Counterfactuals reveal that broad collateral easing and targeted flattening of age-based collateral generate output and welfare gains, whereas flattening tenure-based collateral yields smaller gains and higher inequality. Policy exercises show that fiscal subsidies and user-cost relief on capital to young entrepreneurs at entry can deliver aggregate gains, while public-guaranteed collateral is welfare-improving when eligibility extends to their first few entrepreneurial years, despite a materially higher fiscal cost.