Publications
Publications
- 2025
- HBS Working Paper Series
Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation
By: Kyle Herkenhoff, Josh Lerner, Gordon M. Phillips, Francisca Rebelo and Benjamin Sampson
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
Citation
Herkenhoff, Kyle, Josh Lerner, Gordon M. Phillips, Francisca Rebelo, and Benjamin Sampson. "Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation." Harvard Business School Working Paper, No. 25-046, March 2025. (Revised June 2025.)