Working Paper: NBER ID: w15632
Authors: Shai Bernstein; Josh Lerner; Morten Sørensen; Per Strömberg
Abstract: The growth of the private equity industry has spurred concerns about its potential impact on the economy more generally. This analysis looks across nations and industries to assess the impact of private equity on industry performance. Industries where PE funds have invested in the past five years have grown more quickly in terms of productivity and employment. There are few significant differences between industries with limited and high private equity activity. It is hard to find support for claims that economic activity in industries with private equity backing is more exposed to aggregate shocks. The results using lagged private equity investments suggest that the results are not driven by reverse causality. These patterns are not driven solely by common law nations such as the United Kingdom and United States, but also hold in Continental Europe.
Keywords: private equity; industry performance; productivity; employment
JEL Codes: G24; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| private equity investments (G24) | faster growth in productivity (O49) |
| private equity investments (G24) | faster growth in employment (O49) |
| PE-backed industries (L65) | higher growth rates of production (O49) |
| PE-backed industries (L65) | higher growth rates of value added (O49) |
| investments made 2 to 5 years prior (G11) | improved industry performance (L19) |
| PE investments (G24) | not merely reflective of existing growth trends (O49) |
| PE-backed industries (L65) | no significant differences in volatility (C58) |