Crash , the Migration of Technical Skills , and Productivity Growth after the Bust Draft – Please Do Not

This paper uses data on IT labor and skills to test the hypothesis that IT-sector investment during the dot-com bubble produced a supply of new, e-commerce related technical skills that diffused to firms in IT-using industries after the bust, contributing to a) e-commerce adoption in IT-using firms and b) shifting patterns of productivity growth towards a new set of industries (the “second surge”) after 2000. The effects were strongest in cities where dot-com layoffs were concentrated— especially cities in California—and among technology “leaders” in IT-using sectors. By contrast, the older generations of technical skills demanded by technology “laggards” were readily available from other IT-using firms so the dot-com bust had little effect on these firms. These results are robust to estimators that use the geographic distribution of IT employment as a quasi-experimental source of variation in firms’ exposure to IT labor market changes after the bust. The findings have implications for research and policy related to IT productivity, IT labor markets, and high-tech clusters. Implications for the more recent wave of social media investment and data analysis skills are also discussed.