Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1068: Private Equity, Layoffs, and Job Polarization

Martin Olsson () and Joacim Tåg ()
Additional contact information
Martin Olsson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Joacim Tåg: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Although private equity firms are often criticized for layoffs, little evidence exists regarding which employees lose their jobs and why. We argue that explanations for the job polarization process can also explain layoffs after buyouts. Buyouts reduce agency problems, which triggers automation, offshoring, and tougher bargaining with labor unions. We show that workers in less productive firms who perform routine or offshorable job tasks are more likely to lose their jobs. The opposite trend holds for workers who perform non-routine or non-offshorable job tasks. Moreover, workers who belong to aggressive labor unions are more likely to lose their jobs.

Keywords: Employment; Job polarization; Labor unions; Private equity buyouts; Leveraged buyouts; Offshoring; Restructuring; ask-biased technological change; Unemployment

JEL-codes: G32; G34; J60

57 pages, April 17, 2015

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