The Long-Term Consequences of the Tech Bubble on Skilled Workers' Earnings

42 Pages Posted: 14 Jun 2018 Last revised: 24 Aug 2018

See all articles by Johan Hombert

Johan Hombert

HEC Paris - Finance Department

Adrien Matray

Princeton University

Date Written: February 25, 2018

Abstract

We use French matched employer-employee data to track skilled individuals entering the labor market during the late 1990s tech bubble. The boom led to a sharp increase in the share of skilled entrants in the tech sector, which offers relative higher wages at the time. When the boom ends, however, the wage premium reverses and these skilled workers end up with a 5.5% wage discount ten years out, relative to similar peers who started in a non-tech sector. Other moments of the wage distribution of the boom, pre-boom, and post-boom cohorts are inconsistent with explanations based on a selection effect or a cycle effect. Instead, we provide suggestive evidence that workers allocated to the booming tech sector accumulate human capital early in their career that rapidly becomes obsolete.

Suggested Citation

Hombert, Johan and Matray, Adrien, The Long-Term Consequences of the Tech Bubble on Skilled Workers' Earnings (February 25, 2018). HEC Paris Research Paper No. FIN-2018-1294. Available at SSRN: https://ssrn.com/abstract=3187093 or http://dx.doi.org/10.2139/ssrn.3187093

Johan Hombert

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Adrien Matray (Contact Author)

Princeton University ( email )

Bendheim Center for Finance
26 Prospect Avenue
Princeton, NJ 08540
United States

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