Private Equity and Labor Outcomes: Does Institutional Context Matter? Evidence from the United States and Europe

Abstract

This thesis examines how private equity ownership affects firm-level employment and aggregate labor costs, and whether labor market institutions moderate these effects across France, Germany, Sweden, the United Kingdom, and the United States. A two-way fixed effects difference-in-differences design with propensity score matched controls is applied to 3782 PE-acquired firms over the years 2005–2016. The pooled employment effect is insignificant (+1.9%, p = 0.125), though country-level effects diverge. The US produces −10.9% and Germany +14.6%, with cross-country equality rejected (F(4,523) = 7.80, p < 0.001), indicating the pooled null masks opposing institutional effects. PE ownership is associated with a significant 8.2% staff cost reduction (p < 0.001) and 12.1% decline in staff cost intensity (p = 0.002). A 2.2 percentage point EBITDA margin decline supports redistribution over efficiency. Institutional context reverses the staff cost effect: high-EPL countries show a 14.6% reduction (p = 0.001) while low-EPL countries show a 15.2% increase (p = 0.032). Results are robust to MBO subsampling and alternative institutional measures, though sensitive to stricter matching. Both primary outcomes exhibit significant pre-acquisition divergence from controls. Hence, estimates are interpreted as associations informative about direction and magnitude.