Innovation Booms, Easy Financing, and Human Capital Accumulation

Johan Hombert and Adrien Matray

No 32012, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Innovation booms are often fueled by easy financing that allows new technology firms to pay high wages that attracts skilled labor. Using the late 1990s Information and Communication Technology (ICT) boom as a laboratory, we show that skilled labor joining this new sector experienced sizeable long-term earnings losses. We show these earnings patterns are explained by faster skill obsolescence rather than either worker selection or the overall bust in the ICT sector. During the boom, financing flowed more to firms whose workers would experience the largest productivity declines, amplifying the negative effect of labor reallocation on aggregate human capital accumulation.

JEL-codes: E23 J24 O33 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-fdg, nep-hrm, nep-ict, nep-lma and nep-tid
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