Start Date
12-17-2013
Description
This paper uses novel data on the employment histories of a large fraction of the US workforce to present empirical evidence that corporate technological investment has a significant impact on workers’ subsequent labor market outcomes. Exploiting leveraged buyouts as shocks to firms’ production technologies, we find that employees retained after a private equity acquisition experienced increased long run employment tenures, reductions in short run unemployment durations, and higher rates of within-occupation mobility. The evidence supports the view that private equity investment, by upgrading the technology of the firm, imparts valuable and transferable human capital to retained workers. The effects are especially pronounced for workers in occupations complementary to IT-enabled work practices, and for those who are employed at the acquired firm for longer durations before exit. The findings suggest that employers’ investments in information technology are a critical determinant of human capital stock and subsequent labor outcomes for workers.
Recommended Citation
Agrawal, Ashwini and Tambe, Prasanna, "Private Equity, Technological Investment, and Labor Outcomes" (2013). ICIS 2013 Proceedings. 2.
https://aisel.aisnet.org/icis2013/proceedings/EconomicsOfIS/2
Private Equity, Technological Investment, and Labor Outcomes
This paper uses novel data on the employment histories of a large fraction of the US workforce to present empirical evidence that corporate technological investment has a significant impact on workers’ subsequent labor market outcomes. Exploiting leveraged buyouts as shocks to firms’ production technologies, we find that employees retained after a private equity acquisition experienced increased long run employment tenures, reductions in short run unemployment durations, and higher rates of within-occupation mobility. The evidence supports the view that private equity investment, by upgrading the technology of the firm, imparts valuable and transferable human capital to retained workers. The effects are especially pronounced for workers in occupations complementary to IT-enabled work practices, and for those who are employed at the acquired firm for longer durations before exit. The findings suggest that employers’ investments in information technology are a critical determinant of human capital stock and subsequent labor outcomes for workers.