Practical Applications of Private Equity Investment and Local Employment Growth: A County-Level Analysis

Practical Applications Summary

In Private Equity Investment and Local Employment Growth: A County-Level Analysis, from the Winter 2020 issue of The Journal of Alternative Investments, Joshua Cox (of Control Risks) and Bronwyn Bailey (of BB-Advisors) use a new approach to answer the question of whether private equity investment increases employment. Previous studies have been inconclusive or contradictory. Sometimes past results indicated a loss of employment due to increased efficiencies from private equity investment, while other results indicated an increase in employment, albeit a statistically insignificant one. These studies focused on company-level employment growth, however. In contrast, Cox and Bailey examine countywide data and look for spillover effects: employment growth beyond that in the company receiving the private equity investment. The authors examine a host of control variables that might otherwise explain employment growth. In each statistical test, the association between lagged, countywide employment growth and private equity investment is positive and statistically significant.