Working Paper: CEPR ID: DP17227
Authors: Catarina Lebre Branco; Dirk Dohse; Joo Pereira dos Santos; Jos Tavares
Abstract: This paper takes a deep and comprehensive look into the firm-level behavioral reactions to a massivetransportation cost shock. Exploiting rich data encompassing the universe of Portuguese private firmsand a natural experiment we find that the introduction of tolls on previously toll-free highways caused asubstantial decrease of turnover and firm profits. In response to the tolls, firms reduced expenses, cuttingemployment-related expenses and purchases of other inputs in a similar magnitude. Labor costs werereduced by employment cuts rather than by wage cuts. We find evidence for increased firm exit in treatedmunicipalities, but not for increased re-location.
Keywords: road tolls; infrastructure; firm performance; firm behavior; location; portugal
JEL Codes: R48; L25; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of tolls on previously toll-free highways (R48) | significant reduction in firm turnover (M51) |
| introduction of tolls on previously toll-free highways (R48) | significant reduction in profits (D33) |
| introduction of tolls on previously toll-free highways (R48) | significant reduction in value-added (D46) |
| introduction of tolls on previously toll-free highways (R48) | adjustment by cutting employment (J63) |
| introduction of tolls on previously toll-free highways (R48) | increase in firm exit rates (L26) |
| introduction of tolls on previously toll-free highways (R48) | no significant evidence of firm relocation (R30) |
| introduction of tolls on previously toll-free highways (R48) | persistent effects on firm performance (L25) |