Thy Bust, My Boom: Micro Evidence on Small Firms’ Tech Evolution after Dot Com Bubble Burst
This study investigates the impact of mass tech layoffs on non-tech firms. Using micro-level data from the U.S. Census, we find that non-tech firms in regions affected by tech layoffs experienced significant employment growth, particularly among small firms with fewer than 50 employees. This employment growth drives long-term gains in revenue and productivity for a subset of small firms that successfully hire displaced high-skill workers and navigate the challenges of adopting new technologies. These results highlight a crucial, yet often overlooked, externality: disruptions in the tech sector labor market can act as a catalyst for technology advancement and growth in traditionally less dynamic sectors.