Adjusting to a New Technology: Experience and Training

How does the economy react to the arrival of a new major technology? The existing literature on general-purpose technologies (GPTs) has studied the role that mechanisms like secondary innovations, diffusion, and learning by firms play in the adjustment process. By contrast, we focus on a new mechanism: the interplay between technological change and two types of human capital—technology-specific experience and education. We show that technological change that requires more education and training, like computerization, necessarily produces an initial slowdown. On the other hand, technological change that lowers the training requirements, like the move from the artisan shop to the factory, can produce either a bust or a boom. We identify three key properties that determine the outcome: (1) the productivity of inexperienced workers, (2) the speed with which experience raises productivity, and (3) the level of general skills required to operate the new technology.