Private Equity, Technological Investment, and Labor Outcomes
Ashwini K. Agrawal
New York University (NYU) - Department of Finance
New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Information, Operations, and Management Sciences
September 19, 2013
This paper uses proprietary data on the employment histories of a large fraction of the U.S. labor force to assess how private equity acquisitions impact the long-run labor market outcomes of workers. In contrast to commonly held views, we find that employees working at a target firm at the time of an acquisition subsequently realize longer employment durations over their careers relative to comparable workers at non-acquired firms. We provide evidence that the mechanism for these outcomes is employees’ acquisition of human capital facilitated by firm investment in information technologies (IT) and complementary work practices. The effects are especially pronounced for workers who perform tasks that are central to IT-enabled production processes, for workers who are able to quickly acquire new skills, and for workers who remain at an acquired firm for longer durations before exit. We also find that employees of acquired firms are more likely to eventually transition to companies that have demand for IT-related human capital. The findings suggest that the recent wave of private equity acquisitions has imparted workers with transferable skills that complement modern technological advances.
Number of Pages in PDF File: 50
Keywords: private equity, labor outcomes, IT investment, human capital, unemployment, technologyworking papers series
Date posted: June 29, 2013 ; Last revised: October 22, 2013
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