The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 12% over two years after buyouts of publicly listed firms—on average, and relative to control firms—but expands 15% after buyouts of privately held firms. Postbuyout productivity gains at target firms are large on average and much larger yet for deals executed amid tight credit conditions. A postbuyout tightening of credit conditions or slowing of gross domestic product growth curtails employment growth and intrafirm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms. We relate these findings to theories of private equity that highlight agency problems at portfolio firms and within the private equity industry itself.

This paper examines the relation between corporate social responsibility (CSR) performance and tax–motivated income shifting. Using a profit–shifting measure estimated from multinational enterprises (MNEs) data, we find that parent firms with higher CSR scores shift significantly more profits to their low-tax foreign subsidiaries. Overall, our evidence suggests that MNEs engaging in CSR activities acquire legitimacy and moral capital that temper negative responses by stakeholders and thus have greater scope and chance to engage in unethical profit-shifting activities, consistent with the legitimacy theory.

We document and dissect a new stylized fact about firm growth: the shift from labor to intermediate inputs. This shift occurs in input quantities, cost and output shares, and output elasticities. We establish this fact using German firm-level data and replicate it in administrative firm data from 11 additional countries. We also document these patterns in micro-aggregated industry data for 20 European countries (and, with respect to industry cost shares, for the US). We rationalize this novel regularity within a parsimonious model featuring (i) an elasticity of substitution between intermediates and labor that exceeds unity, and (ii) an increasing shadow price of labor relative to intermediates, due to monopsony power over labor or labor adjustment costs. The shift from labor to intermediates accounts for one half to one third of the decline in the labor share in growing firms (the remainder is due to wage markdowns and markups) and rationalizes most of the labor share decline in growing industries.

We document and dissect a new stylized fact about firm growth: the shift from labor to intermediate inputs. This shift occurs in input quantities, cost and output shares, and output elasticities. We establish this fact using German firm-level data and replicate it in administrative firm data from 11 additional countries. We also document these patterns in micro-aggregated industry data for 20 European countries (and, with respect to industry cost shares, for the US). We rationalize this novel regularity within a parsimonious model featuring (i) an elasticity of substitution between intermediates and labor that exceeds unity, and (ii) an increasing shadow price of labor relative to intermediates, due to monopsony power over labor or labor adjustment costs. The shift from labor to intermediates accounts for one half to one third of the decline in the labor share in growing firms (the remainder is due to wage markdowns and markups) and rationalizes most of the labor share decline in growing industries.

Does increasing common ownership influence firms’ automation strategies? We develop and empirically test a theory indicating that institutional investors’ common ownership drives firms that employ workers in the same local labor markets to boost automation-related innovation. First, we present a model integrating task-based production and common ownership, demonstrating that greater ownership overlap drives firms to internalize the impact of their automation decisions on the wage bills of local labor market competitors, leading to more automation and reduced employment. Second, we empirically validate the model’s predictions. Based on patent texts, the geographic distribution of firms’ labor forces at the establishment level, and exogenous increases in common ownership due to institutional investor mergers, we analyze the effects of rising common ownership on automation innovation within and across labor markets. Our findings reveal that firms experiencing a positive shock to common ownership with labor market rivals exhibit increased automation and decreased employment growth. Conversely, similar ownership shocks do not affect automation innovation if firms do not share local labor markets.

Wir untersuchen die Veränderung der Unternehmensdynamik in Europa seit 2000 anhand neuer Daten, die wir für 19 europäische Länder erhoben haben. In allen Ländern dokumentieren wir einen breit angelegten Rückgang der Unternehmensdynamik, der die meisten Wirtschaftszweige und Firmengrößenklassen betrifft. Große und ältere Unternehmen verzeichnen den stärksten Rückgang der Unternehmensdynamik. Gleichzeitig geht der Anteil an Personen, die in jungen Unternehmen arbeiten, zurück. In Übereinstimmung mit Ergebnissen aus den USA reagieren Unternehmen in Europa weniger stark auf Produktivitätsveränderungen als früher („Reaktivität von Firmen“), was einen Teil des Rückgangs der Unternehmensdynamik erklärt. Im Gegensatz zur bisherigen Evidenz für die USA hat sich in Europa jedoch auch die Dynamik von Produktivitätsschocks abgeschwächt, was einen weiteren Teil des Rückgangs der Unternehmensdynamik erklärt. Für das deutsche Verarbeitende Gewerbe berechnen wir, dass der Rückgang der Reaktivität von Firmen ca. 40% des Rückgangs der Unternehmensdynamik erklärt, während die Abschwächung von Produktivitätsschocks 60% des Rückgangs der Unternehmensdynamik erklärt. Diese Prozesse deuten darauf hin, dass Marktfriktionen, wie beispielsweise Firmenmarktmacht in Europa, zu zunehmenden Fehlallokationen führen und dass die Innovationsprozesse sich abgeschwächt haben, woraus eine geringere Umverteilung von Marktanteilen zwischen Firmen resultiert.

Analysis of business dynamism outside the US has been limited by the availability of comparable cross-country data. This column presents new insights on the trends and drivers of business dynamism using a novel dataset for 19 European countries. Across all 19 countries, the authors document structural declines in job reallocation rates and employment shares in young firms. The decline in job reallocation can be rationalised by both declines in the responsiveness of labour demand to productivity shocks and lower dispersion of productivity innovations. A new decomposition suggests that the decline in responsiveness can be attributed mainly to lower sales growth and stronger markup increases.