Publications
Publications
- 2025
- HBS Working Paper Series
Private Equity and Workers: Modeling and Measuring Monopsony, Reallocation, and Trust
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, (2) breach of trust
of implicit contracts with workers, 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. Moreover, layoffs and wage losses are very similar across
occupation and employee characteristics, suggesting a rejection of the breach of trust hypothesis.
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, Reallocation, and Trust." Harvard Business School Working Paper, No. 25-046, March 2025.