How IT-specialized majors pay off: Evidence from an IT industry shock

This paper studies how industry-specific shocks affect workers with specialized skills, focusing on the impact of the burst of the dotcom bubble on the careers of IT-specialized college graduates in Sweden. Graduates entering the labor market during the bust faced sharp initial earnings penalties and lower probabilities of IT sector employment compared to boom cohorts. However, they exhibited remarkable resilience, recovering earnings by leveraging their skills in high-paying, non-IT occupations. Incumbent IT workers, while remaining within the IT sector, experienced a decline in earnings as they moved to lower-premium firms. • The dotcom bust sharply cut initial earnings for new IT graduates. • Graduates recovered by using their IT skills in other high-paying occupations. • Incumbent IT workers’ earnings fell as they moved to lower-premium firms within the IT sector.