Social Returns to Dot-com Investment

Economists have observed a shift in productivity growth from IT-producing to IT-using industries after the dot-com bust, but the causes of this shift remain unexplained. This paper uses fine-grained data on IT labor movements from online resume databases to track the flow of skills out of IT producing firms after the dot-com bust, and to test the hypothesis that a reallocation of these technical skills after the crash accelerated productivity growth in firms in a new set of industries after 2000 (the “second surge”). The effects were strongest for IT-using firms in cities in which dot-com layoffs were concentrated. The evidence is consistent with the hypothesis that the shift in productivity growth can be partially explained because of a change in the technical labor supply curve facing firms in IT-using industries. Implications for how current investment in social media and data analysis may impact future productivity growth patterns are also considered.