European Business Schools Librarian's Group

HEC Research Papers Series,
HEC Paris

No 1649: Innovation Booms, Easy Financing, and Human Capital Accumulation

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

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

JEL-codes: G24; J24; J31; O33

85 pages, July 8, 2026

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