Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation

Kyle Herkenhoff, Josh Lerner, Gordon M. Phillips, Francisca Rebelo and Benjamin Sampson

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: We measure the real effects of private equity buyouts on worker outcomes by building a new database that links transactions to matched employer-employee data in the United States. To guide our empirical analysis, we derive testable implications from three theories in which private equity managers alter worker outcomes: (1) exertion of monopsony power in concentrated markets, (2) breach of implicit contracts with targeted groups of workers, including managers and top earners, and (3) efficient reallocation of workers across plants. We do not find any evidence that private equity-backed firms vary wages and employment based on local labor market power proxies. Wage losses are also very similar for managers and top earners. Instead, we find strong evidence that private equity managers downsize less productive plants relative to productive plants while simultaneously reallocating high-wage workers to more productive plants. We conclude that post-buyout employment and wage dynamics are consistent with professional investors providing incentives to increase productivity and monitor the companies in which they invest.

Keywords: Private equity; employment; wages; monopsony; market power; productivity (search for similar items in EconPapers)
JEL-codes: G20 G34 L1 (search for similar items in EconPapers)
Date: 2025-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www2.census.gov/library/working-papers/2025/adrm/ces/CES-WP-25-37.pdf First version, 2025 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:25-37

Access Statistics for this paper

More papers in Working Papers from U.S. Census Bureau, Center for Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dawn Anderson ().