Private Equity, Jobs, and Productivity

70 Pages Posted: 20 Sep 2013 Last revised: 3 Mar 2023

See all articles by Steven Davis

Steven Davis

Stanford University

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER); Hoover Institution

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Kyle Handley

University of California, San Diego (UCSD) - School of Global Policy & Strategy; National Bureau of Economic Research (NBER)

Ron S. Jarmin

U.S. Census Bureau

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Private Capital Research Institute

Javier Miranda

US Census Bureau — Economy-Wide Statistics Division

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

Private equity critics claim that leveraged buyouts bring huge job losses and few gains in operating performance. To evaluate these claims, we construct and analyze a new dataset that covers U.S. buyouts from 1980 to 2005. We track 3,200 target firms and their 150,000 establishments before and after acquisition, comparing them to controls defined by industry, size, age, and prior growth. Relative to controls, employment at target establishments falls 3 percent over two years post buyout and 6 percent over five years. However, target firms also create more new jobs at new establishments, and they acquire and divest establishments more rapidly. Considering all adjustment margins, relative net job loss at target firms is a modest one percent of employment over two years post buyout. In contrast, the sum of gross job creation and destruction at target firms exceeds that of controls by 14 percent of employment over two years. Buyouts also bring TFP gains at target firms and reductions in earnings per worker. Productivity gains arise mainly from an accelerated exit of less productive establishments and greater entry of more productive ones - that is, from a directed reallocation of jobs within target firms.

Suggested Citation

Davis, Steven and Davis, Steven J. and Haltiwanger, John C. and Handley, Kyle and Jarmin, Ron S. and Lerner, Josh and Miranda, Javier, Private Equity, Jobs, and Productivity (September 2013). NBER Working Paper No. w19458, Available at SSRN: https://ssrn.com/abstract=2328504

Steven Davis (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Steven J. Davis

University of Chicago ( email )

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National Bureau of Economic Research (NBER)

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Hoover Institution

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John C. Haltiwanger

University of Maryland - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Institute for the Study of Labor (IZA) ( email )

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Germany

Kyle Handley

University of California, San Diego (UCSD) - School of Global Policy & Strategy ( email )

9500 Gilman Drive #0519
La Jolla, CA 92093-0519
United States

HOME PAGE: http://www.kylehandley.com

National Bureau of Economic Research (NBER)

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Ron S. Jarmin

U.S. Census Bureau ( email )

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Josh Lerner

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Harvard University - Private Capital Research Institute ( email )

114 Western Ave
Allston, MA 02134
United States

Javier Miranda

US Census Bureau — Economy-Wide Statistics Division ( email )

Washington, DC
United States

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