Innovation Booms, Easy Financing, and Human Capital Accumulation
July 06, 2026
Summary
Studying the information and communication technology (ICT) boom in the late 1990s, the authors of this working paper show that high-skill workers who joined the ICT sector during the boom experienced sizeable long-term earnings losses, which stem from accelerated skill obsolescence rather than worker selection or the subsequent bust in the ICT sector.
View PaperWorking Paper 2026-8
Abstract: Innovation booms are often fueled by easy financing, allowing new technology firms to pay high wages that attract skilled labor. Studying the information and communication technology (ICT) boom in the late 1990s, we show that high-skill workers who joined the ICT sector during the boom experienced sizeable long-term earnings losses. These earnings patterns stem from accelerated skill obsolescence rather than worker selection or the subsequent bust in the ICT sector. Moreover, during the boom, financing disproportionately flowed to firms whose workers would later experience the largest productivity declines, amplifying the negative effect of labor reallocation on aggregate human capital accumulation.
JEL classification: J24 O33 J31 G24
Key words: innovation, human capital, financing
https://doi.org/10.29338/wp2026-08
Johan Hombert is with HEC Paris and CEPR. Adrien Matray is with the Federal Reserve Bank of Atlanta and CEPR.
This paper previously circulated under the title “The Long-Term Consequences of the Tech Bubble on Skilled Workers’ Earnings.” Special thanks to Chenzi Xu for unfailing support and numerous discussions. The authors also thank Pierre Azoulay, Nick Bloom, Claudia Custodio, Denis Gromb, Bronwyn Hall, Stefan Lewellen, Stefano Lovo, Marco Pagano, and Jon Steinsson. Hombert acknowledges financial support from the Investissements d’Avenir Labex (ANR-11-IDEX-0003/Labex Ecodec/ANR-11-LABX-0047). Pablo Enrique Rodriguez provided excellent research assistance. Any opinions expresses are those of the authors and do not represent the views of the Federal Reserve Bank of Atlanta or the Federal Reserve System. A replication package is available at https://johanhombert.github.io/TechBubble_ReplicationPackage.zip.
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