Innovation Booms, Easy Financing, and Human Capital Accumulation

Johan Hombert and Adrien Matray
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Johan Hombert: HEC Paris - Finance Department
Adrien Matray: Federal Reserve Banks - Federal Reserve Bank of Atlanta; Centre for Economic Policy Research (CEPR)

No 1649, HEC Research Papers Series from HEC Paris

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.

Keywords: innovation; human capital; financing (search for similar items in EconPapers)
JEL-codes: G24 J24 J31 O33 (search for similar items in EconPapers)
Pages: 85 pages
Date: 2026-07-08
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1649

DOI: 10.29338/wp2026-08

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