Nobody’s Gonna Slow Me Down? The Effects of a Transportation Cost Shock on Firm Performance and Behavior

Catarina Lebre Branco, Dirk Dohse, João Pereira Dos Santos and Tavares, José

No 17227, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper takes a deep and comprehensive look into the firm-level behavioral reactions to a massive transportation cost shock. Exploiting rich data encompassing the universe of Portuguese private firms and a natural experiment we find that the introduction of tolls on previously toll-free highways caused a substantial decrease of turnover and firm profits. In response to the tolls, firms reduced expenses, cutting employment-related expenses and purchases of other inputs in a similar magnitude. Labor costs were reduced by employment cuts rather than by wage cuts. We find evidence for increased firm exit in treated municipalities, but not for increased re-location.

Keywords: Road tolls; Infrastructure; Firm performance; Firm behavior; Location; Portugal (search for similar items in EconPapers)
JEL-codes: L25 R12 R48 (search for similar items in EconPapers)
Date: 2022-04
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