Finance and Economics Discussion Series (FEDS)
February 2023
IT Shields: Technology Adoption and Economic Resilience during the COVID-19 Pandemic
Myrto Oikonomou, Nicola Pierri, Yannick Timmer
Abstract:
We study the labor market effects of information technology (IT) during the onset of the COVID-19 pandemic, using data on IT adoption covering almost three million establishments in the US. We find that in areas where firms had adopted more IT before the pandemic, the unemployment rate rose less in response to social distancing. IT shields all individuals, regardless of gender and race, except those with the lowest educational attainment. Instrumental variable estimates–leveraging historical routine employment share as a booster of IT adoption– confirm IT had a causal impact on fostering labor markets’ resilience. Additional evidence suggests this shielding effect is due to the easiness of working-from-home and to stronger creation of digital jobs in high IT areas.
Keywords: Unemployment Rate, Technology, IT Adoption, Inequality, Skill-Biased Technical Change
DOI: https://doi.org/10.17016/FEDS.2023.010
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