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Ruhr Economic Papers #949


Catarina Branco, Dirk C. Dohse, João Pereira dos Santos, José Tavares

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

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.

ISBN: 978-3-96973-112-3

JEL-Klassifikation: R48, L25, R12

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