Abstract

http://ssrn.com/abstract=1107175
 
 

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Private Equity and Employment


Steven J. Davis


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

John Haltiwanger


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

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)

Javier Miranda


U.S. Census Bureau - Center for Economic Studies

October 1, 2011

US Census Bureau Center for Economic Studies Paper No. CES-WP-08-07R

Abstract:     
Private equity critics claim that leveraged buyouts bring huge job losses. To investigate this claim, we construct and analyze a new dataset that covers U.S. private equity transactions from 1980 to 2005. We track 3,200 target firms and their 150,000 establishments before and after acquisition, comparing outcomes to controls similar in terms of industry, size, age, and prior growth. Relative to controls, employment at target establishments declines 3 percent over two years post buyout and 6 percent over five years. The job losses are concentrated among public-to-private buyouts, and transactions involving firms in the service and retail sectors. But target firms also create more new jobs at new establishments, and they acquire and divest establishments more rapidly. When we consider these additional adjustment margins, net relative job losses at target firms are less than 1 percent of initial employment. In contrast, the sum of gross job creation and destruction at target firms exceeds that of controls by 13 percent of employment over two years. In short, private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment. The creative destruction response mainly involves a more rapid reallocation of jobs across establishments within target firms.

Number of Pages in PDF File: 51

Keywords: Private Equity, Buyouts, Leverage, Job Loss, Job Creation, Employment Dynamics

JEL Classification: D22, G34, L25, M54

working papers series


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Date posted: March 26, 2008 ; Last revised: October 6, 2011

Suggested Citation

Davis, Steven J. and Haltiwanger, John and Jarmin, Ron S. and Lerner, Josh and Miranda, Javier, Private Equity and Employment (October 1, 2011). US Census Bureau Center for Economic Studies Paper No. CES-WP-08-07R. Available at SSRN: http://ssrn.com/abstract=1107175 or http://dx.doi.org/10.2139/ssrn.1107175

Contact Information

Steven J. Davis
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7312 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
John C. Haltiwanger
University of Maryland - Department of Economics ( email )
College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
Ron S. Jarmin
U.S. Census Bureau ( email )
4700 Silver Hill Road
Washington, DC 20233
United States
Josh Lerner (Contact Author)
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
Javier Miranda
U.S. Census Bureau - Center for Economic Studies ( email )
4700 Silver Hill Road
Washington, DC 20233
United States
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