Do private equity buyouts destroy more jobs than they create?

Fascinating new NBER working paper by a team of economists that includes Chicago Booth's Steve Davis and Harvard's Josh Lerner.  They put together a data set of 3200 firms and 150,000 operating establishments that were targets and match them to comparable establishments (to serve as a control group).  In the establishments that were taken over, employment fell by 6 percent more over five years after the buyout compared to the control group.  Job losses were concentrated in retail and service sectors.

Sounds like the answer is yes.  But wait.  The authors then ask about the creation of new establishments and find that buyout targets were more likely to open new ventures than the controls.  Once this is taken into account, the net job loss becomes less than 1 percent.

The study also looks at the process of job creation and destruction in the target and control firms and finds that the overall churn level is 13% higher in the target firms.  This is consistent with the "creative destruction" theory of Austrian economist Joseph Schumpeter, who in essence argued that you have to break some eggs to make an omelet.