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

Author

Listed:
  • Tavares, José
  • Lebre Branco, Catarina
  • Dohse, Dirk
  • dos Santos, Joao Pereira

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.

Suggested Citation

  • Tavares, José & Lebre Branco, Catarina & Dohse, Dirk & dos Santos, Joao Pereira, 2022. "Nobody’s Gonna Slow Me Down? The Effects of a Transportation Cost Shock on Firm Performance and Behavior," CEPR Discussion Papers 17227, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17227
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    More about this item

    Keywords

    Road tolls; Infrastructure; Firm performance; Firm behavior; Location; Portugal;
    All these keywords.

    JEL classification:

    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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