Private Equity, Technological Investment, and Labor Outcomes

This paper uses proprietary data on the employment histories of a large fraction of the U.S. labor force to show that labor market outcomes can be partly explained by previous employers’ technology investment decisions. Exploiting leveraged buyouts as shocks to firms’ production technologies, we find that workers employed when a private equity acquisition occurs realize longer subsequent employment tenures, reductions in short run unemployment durations, and higher rates of within-occupation mobility over their careers. The effects are especially pronounced for workers in occupations that are complementary to IT-enabled work practices, workers who can be trained to acquire new skills quickly, and for workers who are retained at the acquired firm for longer durations prior to exit. The findings suggest that corporate investment in information technology imparts transferrable, task-specific human capital to workers.