Every cloud has a silver lining: micro-level evidence on the cleansing effects of the portuguese financial crisis

Daniel Dias
Authors registered in the RePEc Author Service: Carlos Robalo Marques

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: Using firm level data, we show that the Portuguese financial crisis had, overall, a cleansing effect on productivity. During the crisis, aggregate productivity gains, both in manufacturing and services, came from relatively higher contributions of entry and exit of firms and from reallocation of resources between surviving firms. At the microlevel, we find that the crisis reduced the probability of survival for high and low productivity firms, but hit low productivity firms disproportionately harder, in line with the cleansing hypothesis. The correlation between productivity and employment growth in manufacturing and services strengthened, but the correlation between productivity and capital growth in the service sector weakened. We attribute this result in part to structural sectoral differences, but mainly to the large negative demand and credit shocks that affected mainly the nontradable services sub-sector. We also find that the probability of exit increased disproportionately for firms operating in more financially dependent industries, but there is no evidence of a scarring effect on productivity stemming from changing credit conditions.

JEL-codes: D24 E32 L25 O47 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-bec, nep-eff, nep-eur, nep-mac, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w201818

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