The Economic Impact of Private Equity

Over the past half century, private equity has grown from a tiny part of the financial sector into a powerful industry, often controlling global brands. As the industry has grown, so too has academic interest in the sector. However, the vast majority of empirical research has focused on the impact of private equity at the microeconomic level, typically focusing on the experience of a pool of individual firms rather than the economy as a whole. As such, the analysis has tended to be partial in nature, rather than taking a general equilibrium approach. This article reviews evidence on the microeconomic impact of private equity, and examines whether these findings are visible in macroeconomic data. Across a pool of developed economies with significant private equity activity, there is no sign that private equity investment significantly boosts employment, productivity or hence growth at the macroeconomic level.