DP14136 Technology Boom, Labor Reallocation, and Human Capital Depreciation

Author(s): Johan Hombert, Adrien Matray
Publication Date: November 2019
JEL(s): E24, J24, O33
Programme Areas: Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14136

Using matched employer-employee data from France, we uncover an "ICT boom-cohort discount" on the long-term wage of the large cohort of skilled workers entering in the Information and Communication Technology (ICT) sector during the late 1990s technology boom. Despite starting with 5% higher wages, these workers experience lower wage growth and end up with 6% lower wages fifteen years out, relative to similar workers who started outside the ICT sector. Other moments of the wage distribution are inconsistent with selection effects. These workers accumulate human capital early in their career that rapidly depreciates, implying that labor reallocation during technology booms can have long-lasting effects.