Private Equity and Pay Gaps inside the Firm

Private Equity and Pay Gaps inside the Firm

Alexandra Roulet (INSEAD)

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ABSTRACT:

Exploiting a 20-year sample of leveraged buyouts matched to French administrative data, we document that target firms post-buyout experience reduced within-firm wage inequality together with increased profitability relative to control firms. The p90/p50 and p90/p10 wage ratios as well as the gender wage gap decline. We show that turnover tends to reduce pay gaps in general because separated employees are replaced by (younger) and cheaper ones. What drives the reduction in pay gaps at target firms relative to control firms is the increase in turnover triggered by the buyout, in particular in the managerial rank. We provide evidence that this increased turnover is likely driven by a reduction in entrenchment rather than a breach of implicit contracts.

BIO:

Alexandra Roulet is an Assistant Professor of Economics at INSEAD and a CEPR Research Fellow. She graduated from the Ecole Normale Supérieure in Paris, and earned her PhD in Economics at Harvard University in 2017. Alexandra’s research focuses on labour economics and has been published in leading academic journals such as the American Economic Review or the Quarterly Journal of Economics. She worked as economic advisor to President Macron and Prime Minister Borne from June 2022 to September 2023.