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Illustration: Lazaro Gamio / Axios

Private equity takeovers result in significant job losses, according to a landmark new study by Josh Lerner of Harvard Business School and Steve Davis of the University of Chicago.

Why it matters: Private equity regularly defends its employment record by citing a 2011 study by the same two academics.

By the numbers: The new report finds average job losses of 4.4% in the two years after a company is bought by private equity, relative to control companies. This is up from less than 1% in the earlier study. It also finds average per worker wage decreases of 1.7%. It also finds significant differences based on the type of buyout:

  • Employment falls 13% in buyouts of publicly traded companies, relative to controls.
  • Employment falls 16% in divisional carveouts.
  • Employment rises 13% in buyouts of privately held companies (non PE-backed).
  • Employment rises 10% in buyouts of PE-backed companies.

What the authors are saying: "We find that the real side effects of buyouts on target firms and their workers vary greatly by deal type and market conditions. ... This conclusion cast doubts on the efficacy of 'one-size-fits-all' policy prescriptions for private equity."

The report's big silver lining for private equity is around productivity, which is found to rise an average of 8%, compared to controls. This should help the industry's argument that it's about much more than financial engineering.

Methodology: Lerner and Davis constructed a data set based on the U.S. Census Bureau’s Longitudinal Business Database, which is derived from IRS records and for which they needed to receive special access. They then used Capital IQ and other databases to match up the LBD employment records with nearly 10,000 deals from between 1980 and 2013 (earlier report was for 1980–2005).

Go deeper: Funding for China's private equity market falls by a third

Go deeper

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World leaders react to "new dawn in America" under Biden administration

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World leaders have pledged to work with President Biden on issues including the COVID-19 pandemic and climate change, with many praising his move to begin the formal process for the U.S. to rejoin the Paris Climate Agreement.

The big picture: Several leaders noted the swift shift from former President Trump's "America First" policy to Biden's action to re-engage with the world and rebuild alliances.

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In photos: The Biden and Harris inauguration

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President Biden signed his first executive orders into law from the Oval Office on Wednesday evening after walking in a brief inaugural parade to the White House with first lady Jill Biden and members of their family. He was inaugurated with Vice President Kamala Harris at the U.S. Capitol on Wednesday morning.

Why it matters: Many of Biden's day one actions immediately reverse key Trump administration policies, including rejoining the Paris Agreement and the World Health Organization, launching a racial equity initiative and reversing the Muslim travel ban.

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President Biden speaks to Sen. Mitch McConnell after being sworn in at the West Front of the U.S. Capitol on Wednesday. Photo: Erin Schaff-Pool/Getty Images

Several Republicans praised President Biden's calls for unity during his inaugural address on Wednesday and pledged to work together for the benefit of the American people.

Why it matters: The Democrats only have a slim majority in the Senate and Biden will likely need to work with the GOP to pass his legislative agenda.