Private Equity, Jobs, and Productivity

70 Pages Posted: 20 Sep 2013 Last revised: 7 Dec 2015

See all articles by Steven J. Davis

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)

Kyle Handley

University of Michigan, Stephen M. Ross School of Business

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 Administrative Records Research and Applications

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 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 J. Davis

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
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773-702-7312 (Phone)
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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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
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Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Kyle Handley

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Ron S. Jarmin

U.S. Census Bureau ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

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

Javier Miranda

U.S. Census Bureau - Center for Administrative Records Research and Applications ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

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