Adopting the Euro: Comparing country performance

June 26, 2024

This research investigates whether joining the European Monetary Union and losing own’s national monetary policy affected the economic growth of Eurozone countries. By using the synthetic control method, it creates counterfactual scenarios to estimate how each Eurozone country would have performed had it not adopted the euro. Our findings indicate that most Eurozone countries experienced minimal changes in economic growth post-adoption. Notably, Portugal was one of the mild losers, while Ireland emerged as a clear winner.

Credit access and market access: the SME-Leader program

June 25, 2024

This paper shows that credit access is a key barrier to exporting. It focuses on the implementation of a unique credit guarantee scheme for SMEs (Small and Medium Enterprises) in Portugal between 2008 and 2014 — the SME-Leader program (programa PME-Líder). By exploiting firm eligibility for this scheme, the paper establishes a causal impact of access to finance on firm export dynamics. The paper finds that access to the credit guarantee and subsequent access to credit sharply increase the probability of exporting: qualifying firms were approximately 12% more likely to export than similar non-qualifying firms.

A robust method to date recessions and compute output gaps

June 17, 2024

This article discusses ways to estimate trends in economic series such as GDP, steady increases in the series over time. In most applications, filtering consists in applying a linear operator like the average to a moving-centered window of the data. A special case of moving average is the widely used Hodrick and Prescott (HP) filter. In this method, the trend is chosen to minimise the weighted sum of the squares of deviations from data and the sum of the squares of the trend’s second difference.

Employment in the electricity sector

April 10, 2024

In the last decade, there has been a deep transformation of the value chain in the electricity sector conveyed by the “3D” paradigm Decentralization, Decarbonization, and Digitalization. This study investigates to what extent the recent paradigm shift in the electricity sector has affected the structure of employment and wages in the Portuguese case. Liberalization in the sector led to the entry of new players and to workforce downsizing, most notably in occupations involving routine cognitive tasks and non-routine manual tasks.

Minimum wage's significant role in reducing wage inequality in Portugal

April 6, 2024

In recent decades, discussions about mounting wage inequality have become central among economists and policymakers, with the potential role of minimum wage policies to address it gaining increased attention. In Portugal, a fascinating case emerges, offering insights into how minimum wage adjustments can significantly impact the wage distribution. Caption: Wage growth between 2006 and 2019 at different points of the wage distribution. The x-axis shows wage deciles from lowest (on the left) to highest (on the right).

Spending a windfall

March 15, 2024

Two shocks hit the world during the 1500s: a technological shock and a monetary shock. The technological shock was the decrease in trading costs obtained with new sea routes between Europe and Asia. The monetary shock was the discovery of gold and silver in America. Portugal had a prominent participation in these events. The difficulty is to isolate the effects of the precious metals from the effects of the sea routes.

The effects of R&D tax credits (SIFIDE scheme) on small and large firms in Portugal

February 27, 2024

Governments worldwide increasingly rely on incentive schemes to promote research and development (R&D) investment, foster innovation, and encourage economic growth. While in 2000, 19 out of the 38 OECD countries gave preferential tax treatment to business R&D expenditure, in 2022 this number increased to 33 countries. What is the effect of (R&D) tax credits on firms’ trajectory? Do firms become more efficient? Caption: Dynamic marginal effects on R&D-related expenditure from SIFIDE tax credits.

Labor-market power and its wage effects

February 18, 2024

Are employers able to profit from labor market concentration to lower wages and distort competition? This is an important public policy question, with significant practical consequences. For instance, the Portuguese competition authority imposed this year a 3.8 million euro fine on IT firms for employee “no poach” arrangements. Another fine, of 11.3 million euro, was imposed in 2022 on football clubs again for “no poach arrangements”. This paper measures labor market concentration and its effects on wages in Portugal.

Exports response to changes in credit conditions

January 26, 2024

Exports represent one fourth of Portuguese GDP and are largely responsible for the economic recovery following the sovereign debt crisis. However, exports and exporters are also fragile as they display a strong dependence on bank credit. This paper studies the impact of an increase in the cost of credit for exporters. This increase is driven by a change in banking regulation (Basel III) which makes giving credit to exporters who sell in high-risk destinations more expensive for banks.

Well-being patterns during the COVID-19 pandemic

January 25, 2024

This study investigates how the COVID-19 pandemic has affected multi-dimensional capability well-being in seven European countries, with a special emphasis on Portugal. The question at hand is how the pandemic and associated containment measures have impacted people’s capability to lead fulfilling lives, a crucial aspect of overall health and well-being. The study spans from April 2020 to January 2022, utilizing a cross-sectional population survey with nine waves of data. The main focus is on changes in well-being across different countries and demographic subgroups.

Portuguese physician's job preferences

January 22, 2024

The global shortage of doctors has raised concerns about their retention, particularly in the face of tight healthcare budgets. This paper studies the preferences of physicians in order to assess how best to retain them. The paper uses a Discrete Choice Experiment in which 697 physicians in Portugal revealed their preferences by making a sequence of choices between two jobs, based on the job attributes at different levels (see figure).

Short-term rentals in Portuguese metropolitan areas and the housing market

January 16, 2024

In the last decade, Portugal has witnessed a significant surge in tourism. This phenomenon, coupled with the proliferation of temporary accommodation services and short-term rental platforms such as Airbnb, has sparked an intense debate due to their perceived role in driving up house prices and displacing residents, shaping the urban landscape across the country, especially in highly touristic areas. This paper studies the substantial growth of short-term rentals in Portugal (see the figure) driven by a pivotal 2014 policy change that created a streamlined process for hosts to register their short-term accommodation services, commonly known as local lodging establishments, to assess its impact on housing prices.

Loss given default in residential mortgage loans in Portugal

December 13, 2023

Expected costs of mortgage default depend on the borrower’s probability of default (PD) and the loss in the event of default (LGD). This paper studies the factors that characterize LGD using comprehensive loan-level data obtained from the Portuguese Central Credit Register. The paper finds that the initial loan-to-value (LTV) ratio is the most important determinant of the LGD of mortgage loans, although the relation between these two variables is not linear.

Can vocational education improve schooling and labor outcomes?

November 13, 2023

Does the vocational education and training (VET) track improve schooling and learning outcomes? Can VET address issues on youth unemployment? These questions are central to ongoing policy debates about how to best integrate young people in the labor market. VET can be a compelling option for all students but specifically for those at risk of dropping out from school. VET’s proposed main benefit is to facilitate school-to-work transition, particularly when training aligns with businesses’ skill requirements.

The rise of the walking dead: zombie firms around the world

November 10, 2023

The macroeconomic implications of unproductive and unviable zombie firms have returned to the forefront of the public debate during the Covid-19 pandemic, as the unprecedented public support to firms may have helped these zombie firms stay afloat. The presence of zombie firms creates important negative spillover effects to healthy firms operating in the same industry: zombie firms distort the competition in the markets in which they operate, ultimately depressing market prices and raising market wages, which crowd out the profits of healthy firms.

Cultural stereotypes of multinational banks

October 23, 2023

Financial markets, even more than other markets, run on trust. Complete contracts accounting for all conceivable contingencies are a textbook abstraction. Adjudication by courts is time consuming and unpredictable. For transactions to be sustained, counterparties must be trusted. This is why one observes a concentration of commercial and financial transactions among individuals with a common cultural background who share extra-economic links, values and trust. While the connections between trust and economic behaviour are general, such considerations apply with special force to investments in the bonds of foreign governments.

Management, performance and pay

October 23, 2023

There is a rich literature showing that the adoption of structured management practices plays a crucial role in explaining the large observed variation in firm performance across industries and countries, but there is less evidence on how management practices affect labour outcomes, in particular wages and wage inequality. This paper combines several different Portuguese datasets, including a large survey on management practices in 2016, in order to examine the relationship between structured management practices, firm performance and wages.

COVID-19, Lockdowns and International Trade

October 4, 2023

The COVID-19 pandemics was the strongest negative shock faced by the global economy in many decades. Its impact on international trade flows was large, mostly due to the lockdowns aimed at curbing the spread of infections. The primary research question of the paper is the quantification of the heterogeneous impact of COVID-19 lockdowns and their stringency on trade flows along different firms’ characteristics and over time. The relevance of this question goes beyond the COVID-19 pandemic crisis.

The distribution of firm growth and business cycles

October 4, 2023

In any given economy, the majority of firms are small while only a handful of firms are relatively large. However, overall aggregate cyclicality is heavily dependent on the behavior of these few, large firms. Specifically, the behavior of large firms plays a fundamental role in the amplification of shocks. Caption: Kurtosis of firm size growth vs. GDP growth for Portugal. This article revisits the role of large firms in business cycle fluctuations in the Portuguese context.

Acquisitions in the green transition era

June 11, 2023

Climate change is increasingly impacting people’s lives, disrupting national economies and transforming ecosystems. According to OECD figures, there is a need for significant infrastructure investment compatible with the goals of the Paris Agreement. In this context, corporate takeovers may foster this needed green transition, as they allow firms to acquire external technological resources (such as patent rights), to complement internal research and development (R&D) projects, or to accelerate the innovation process.

The risk-return framework of banks’ profitability

June 11, 2023

This paper investigates how cyclical systemic risk affects the risk-return relationship in bank profitability in Portugal at different horizons, which is key for bank solvency and financial stability. Macroprudential policy became prominent after the 2008 Global Financial Crisis. This new policy area may tighten bank capital requirements such that banks stay resilient against systemic risk, i.e. any risk that threatens financial stability and could spill over to the economy. Systemic risk is often cyclical, and tightening capital requirements today entails costs and benefits at different horizons.

Supporting small firms through recessions and recoveries

March 30, 2023

Small firms often struggle in getting access to credit. This is especially true during recessions, when banks tighten credit supply. To overcome this, governments around the world have implemented different programs to help small firms. Despite the widespread implementation of these programs, evidence on their effectiveness is mixed and often challenged by difficulties in pinpointing the causal effects of the programs. For example, these programs are usually available to all small firms, who decide whether or not to enter the program.

Multinationals and services imports from havens: when policies stand in the way of tax planning

March 16, 2023

Multinational groups have been in the spotlight because of their activities that shift profits to tax havens, allowing them to minimize corporate tax bills in high-tax countries. The literature has documented several strategies used by multinationals to shift profits. This paper studies one strategy for which systematic empirical evidence is relatively scarce: the use of intra-group services transactions. Under this route, the firms of the group located in high-tax countries may artificially inflate their costs by paying expensive fees for services (e.

Entrepreneur schooling and business activity in Portugal

February 23, 2023

Cross-country regressions imply that human capital plays a major role in explaining output differences across countries, but may be biased by omitted factors such as the quality of institutions, culture or geography, among others. Within-country individual returns to schooling suggest a smaller role, but exclude any effect of human capital on total factor productivity (TFP). A recent literature links cross-country variation in TFP to differences in the average growth rate of firms, yet little is known about what underlies these differences.

Firm adaptation to the COVID-19 crisis

February 22, 2023

The COVID-19 crisis triggered a multitude of economic effects. At the microeconomic level, they varied across economic agents, notably firms, with some showing greater resilience than others, depending on intrinsic characteristics such as size and participation in international trade. Zooming in on firm size, the crisis was deeply felt by smaller firms. As for participation in international trade, stronger connections abroad increased firms’ exposure to global adverse shocks, while providing a broader scope for resilience-enhancing decisions about production and market management.

Universities’ entrepreneurial activity and regional competitiveness

February 6, 2023

Higher education institutions, broadly labelled as ‘universities’, are considered essential actors in the promotion of economic and cultural growth in the modern knowledge society. Often, they are affected by regional stakeholders and are expected to adjust their strategies in order to contribute to technological and economic specialization at the regional level. Caption: Overall impact of Entrepreneurial University factors on regional competitiveness. A commonly accepted definition of an Entrepreneurial University is that it provides the right environment for researchers to generate, transform and commercialize their knowledge and technology.

Knowledge inheritance and performance of spinouts

February 2, 2023

Evidence about the performance of entrepreneurial ventures shows that “spinouts” – new firms started by former employees of established companies – are usually more successful than other start-ups. This is particularly the case when the new venture is started in the same industrial sector where the founder’s former employer operates. The main reason for this superior performance is that spinout founders bring to the new venture specific organizational and technological knowledge acquired while working for their former employers.

The role of mothers on female labor force participation

January 31, 2023

Throughout history, women were not always engaged in paid work. In the United States, for example, female labor force participation jumped from 9% in 1890 to 60% in 1999. Nowadays, there are working women everywhere, and no one is surprised to see a policewoman, a female bus driver or airplane pilot. To explain this unprecedented increase in female labor force participation, economists have stressed the importance of intergeneration transmission mechanisms during the 20th century.

Entry of IKEA and small and medium firms' response

January 3, 2023

Using novel and primary data on local SMEs belonging to the Portuguese furniture production cluster this study addresses the changing nature of competition and local firm’s strategic response to IKEA’s entry and its impact on their performance. The study focuses on clusters, firm strategy and multinational corporations (MNCs) by assessing (i) how local firms, predominantly SMEs, respond to the MNC entry, (ii) which factors explain their strategic response, and (iii) the impact of strategic responses on their performance.

Investment grants and firm productivity

December 31, 2022

This paper evaluates the effectiveness of awarding multiple investment grants to the same firm. Several factors have contributed to bringing public subsidies back to the limelight: the COVID-19 pandemic, trade wars between the US and China, the war in Ukraine, and the disruption in global supply chains. These factors contributed to a global wave of public subsidies in China, in the United States, and in the European Union. This research assesses the impact of investment grants by the European Regional Development Fund (ERDF) on the productivity of Portuguese firms in 2007-2018.

Evolution of price-cost margins during the troika intervention

November 12, 2022

The paper asks if the troika intervention of 2011 - 2014 helped promote a more competitive environment and improve the allocation of scarce resources to benefit economic growth and welfare. The question is generally pertinent, especially during this period where resources were scarce in the public, corporate, and financial sectors. The paper uses data for the period 2010-2016 from Informação Empresarial Simplicaficada, a database containing the annual accounts of Portuguese manufacturing and services firms.

The effects of contract-type mismatch and matching frictions on unemployment duration

October 12, 2022

In dual labor markets permanent contracts (PC) and temporary contracts (TC) coexist. These dual labor markets originate in reforms aimed at increasing labor market flexibility via a higher incidence of fixed-term contracts. Such reforms have become widespread in Europe and their impact on the performance of labor markets has attracted the attention of academics and policymakers. It has been stressed that temporary employment may provide stepping-stone effects to permanent employment and contribute to enhancing the employment chances of youth.

Government support measures in Portugal during the COVID-19 pandemic

October 11, 2022

During the COVID-19 pandemic, the Portuguese government provided a plethora of different support measures for firms. These included state-guarantees for new loans and a public moratorium for existing ones. These measures have been essential to support firms in the most acute phase of the crisis by providing liquidity at reduced costs in a context of an abrupt increase in the level of risk. However, there are still open questions regarding the medium- to long-term impact of these measures.

Market stigma and bank capital

September 29, 2022

The Great Financial Crisis exposed vulnerabilities in the quality and quantity of banks’ capital. It was the catalyst for increasing regulatory capital requirements, including the introduction of macroprudential buffers that can be used during economic downturns to incentivize banks to continue providing credit to the economy instead of engaging in excessive de-leveraging or de-risking behaviors. However, market pressure to maintain or even increase capital ratios can constrain banks in using their buffers during economic downturns.

Do subsidized nursing homes and home care teams reduce hospital bed-blocking?

September 24, 2022

According to the World Health Organization, excessive length of hospital stay is one of the leading sources of inefficiency in healthcare. One possible cause of excessive length of hospital stay is the lack of alternative care arrangements following a hospitalization. When a patient is medically fit to be discharged and yet requires some form of support outside the hospital (a short stay at a nursing home facility or home help), which is not readily available, the patient cannot be safely discharged.

The effects of reducing working hours

August 31, 2022

The debate on if and how to shorten the length of the working week has strengthened in the past years, especially because of the COVID-19 pandemic. The number of working hours can have a direct impact on economic outcomes such as labor cost, employment, and productivity, but also workers’ health and welfare. Since 1995, there have been five national reforms reducing standard working time in European countries. Aside from the (in)famous French 35-hour reform, an interesting yet understudied case study is that of the 1996 Portuguese reform.

Digital technologies and productivity

July 28, 2022

Economies in industrialized countries have been experiencing slow productivity growth and a persistent decline in business dynamics, despite significant technological changes, capital investment and various public programs supporting firms. This paper asks if digitization is able to engender positive effects on productivity and to foster a catch-up process of low-productivity firms. Using a representative sample of Portuguese firms for the period 2014-2019, this study assesses the impact of adopting digital technologies on firms´ productivity.

Firms and wage inequality dynamics

July 28, 2022

Policies aimed at mitigating wage inequality, such as redistribution or access to services, frequently focus on workers. Fewer efforts are directed toward firms, despite their relevance for wage inequality dynamics. This paper exploits a sharp reduction in Portuguese inequality over the last decades – driven exclusively by the compression of firm pay premiums – to pin down the role of firms in the evolution of wage inequality. Over the past two decades, Portugal witnessed a 20 percent decline in wage inequality (see panel A of the figure), almost single-handedly driven by firms (see panel b of the figure).

Economic austerity and the political environment

July 27, 2022

Anti-establishment and EU-skeptic parties have gained significant support since the Great Recession and the subsequent European Sovereign Debt Crisis. Higher vote shares for these parties have increased partisan conflict and led to more fragmented parliaments. Interestingly, the rise in support for extreme parties occurred during a period of significant fiscal policy interventions. In particular, several European countries, such as Portugal, have implemented large-scale fiscal consolidation measures to reduce high levels of public debt, thereby averting the risk of sovereign default.

Cancer patients' survival following the reference centre model implementation

July 18, 2022

This paper performs a survival analysis of cancer patients in Portugal, assessing the impact of the creation of oncology Reference Centres (RCs). RCs are a highly specialized healthcare delivery centre, focused on addressing specific health conditions, such as cancer, and delivering best-in-class treatment. Oncology RCs have been officially recognized in Portugal since 2016, following the European Directive 2011/24/EU, and were a National Health System objective during the Economic Stabilization Program. In a context of financial resources scarcity, information about the efficacy of the investments made in RCs is crucial for decision-making concerning funds allocation.

R&D tax credit and firm behavior

July 18, 2022

Studies carried out to date assessed and compared the impact of public support for R&D activities, whether in direct funding (grants) or tax credits. This paper studies how these instruments’ affect R&D personnel. The growing knowledge orientation of the economy and society and changes in the labor market make investing in skills and their lifelong upgrading increasingly important. Skilled human capital for research, innovation, and economic development are crucial in sustaining the needs of a knowledge economy.

The struggle of small firms to retain high-skill workers

July 18, 2022

Small knowledge firms struggle to keep their best employees: highly-skilled workers are needed for growth and success, but small firms cannot hold onto them. Advanced knowledge increases the productivity of skilled workers. Because large firms are more innovative and technological, this knowledge-skill complementarity may be different for small and large firms. This paper applies discrete-time proportional hazards models with unobserved heterogeneity for several worker skill measures and human capital accumulation, interacted with firm-size categories and industry knowledge-intensity to ascertain how knowledge-skill complementarities are influenced by firm size.

Monetary policy and household consumption spending in Portugal

July 9, 2022

This paper studies the effect of monetary policy across households of different Euro Area countries to understand the effects of the likely scenario of future interest rate hikes by the European Central Bank. Specifically, the paper studies mechanisms through which monetary policy may differentially affect households across the Euro Area. The rise in interest rates should be especially relevant to those countries with high debt levels, like Greece, Portugal, Italy and Spain.

Heterogeneity in gender wage growth gap across fields of study in Europe

June 29, 2022

This paper analyzes the early career dynamics of wages of European college graduates using data from the Flexible Professional in the Knowledge Society, a retrospective survey interviewing individuals a few years after their graduation in 1999/2000. The sample includes individuals from Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain, UK, Portugal and Norway. The paper finds a gender gap of 0.7 percentage points on an average annual raw wage growth over the five-year period after graduation of 6 1/2%.

Narcissistic corporate managers do not share!

June 26, 2022

Stakeholder theory implies that firms’ economic and social purpose is to create value for all their stakeholders, without favoring any group. However, the distribution of the value created is a matter of choice for each firm and may reflect top managers’ values and characteristics. This paper examines whether the narcissistic characteristic of top managers impacts the distribution of value added. Using a sample of 489 top managers (368 males and 121 females) of Portuguese firms, this study shows that narcissism does not impact overall value added.

Are online platforms killing the offline star?

June 22, 2022

Online platforms that facilitate the exchange of goods and services, including delivery services, accommodation, or retail products, have become widespread over the last decade. The COVID-19 shock has further contributed to the accelerated the digitalization of economies. This development has underpinned hopes for a productivity revival. However, significant differences across countries in factors such as access to communication networks and digital skills raise questions about the scope for platform use to underpin broad-based increases in productivity.

Giving zombie firms a second chance

June 22, 2022

The survival of less productive firms hampers the aggregate productivity growth in most developed economies as they consume resources that would be more productive elsewhere. Stimulated by the forbearance of creditors and inefficient insolvency regimes, the zombie phenomenon is generally believed to weaken business dynamism. The paper analyses how the 2012 institutional reforms related to insolvency and prudential supervision of credit institutions, introduced by the Portuguese and European Authorities, have reduced the share of zombie firms in the economy, and how they have impacted the growth of aggregate productivity.

Loan guarantees and their implications for post-COVID-19 productivity

June 22, 2022

Many countries introduced or ramped-up loan guarantee schemes to bridge liquidity shortages as a key element of the policy response to the COVID-19 crisis. The analysis in this paper discusses the potential short and medium-term effects on productivity of loan guarantees via reallocation, relying on historical data on European firms. The findings suggest that, absent policy support, the COVID-19 shock had the potential to seriously distort market selection, as it would have raised sharply the probability to face financial difficulties across the whole distribution of firm-level productivity.

Cash holdings in start-ups and founder sociodemographic characteristics

June 7, 2022

This study examines the determinants of excess cash holdings for Portuguese non-financial start-ups established between 2006 and 2009, paying particular attention to the role of founder sociodemographic and educational characteristics. Cash is one of the most vital assets of a firm. Cash management is extremely crucial for new ventures as they often struggle to survive with very low levels of income and revenues during the first years. Moreover, start-up information is opaque to investors during their earliest years and assets are often intangible and knowledge based.

Is there excessive use of emergency care by walk-in patients?

May 19, 2022

The inappropriate use of Emergency Department (ED) service by patients with non-urgent health problems is a worldwide problem, including in Portugal. Nowadays, with the COVID-19 pandemic, the problem is growing and the subject is again on the agenda. Every patient admitted to the ED is submitted to a risk stratification (RS) assessment. Among the various recognized RS systems, the Manchester Triage System (MTS) has international dissemination. MTS establishes five categories/clinical priorities, instituting a colour for each of them.

Wage inequality and entrepreneurship in regional labour markets

May 19, 2022

Entrepreneurship has been recognized as an important driver of innovation and economic growth. For that reason, policymakers seek to attract knowledge-based and high-tech entrepreneurial activities into their cities and regions. To achieve this objective, increasing attention has been paid to people engaged in ‘creative’ professions, i.e., those occupations where knowledge is created, transformed, or used in innovative ways. By attracting creative professions, policymakers expect to contribute to better economic performance.

Entrepreneurship and industry clusters

May 12, 2022

The clustering of successful firms within small geographical areas is a feature of many industries that is usually attributed to the greater availability of economically valuable information and a specialized workforce. However, it is regularly observed that entrepreneurs locate their firms in their home region rather than being attracted by agglomerations. This paper reconciles these views by arguing that industry clusters can emerge because employees of incumbent firms often leave to create their own successful firms (usually called “spinoffs” or “spinouts”).

Wages and firm-level unexpected good times

April 28, 2022

Suppose that a firm unexpectedly experiences good times in the form of higher revenues. Does it choose to invest or hire more workers? Does it alter workers’ compensation, and if so mainly through base wages or other components of pay? How are these decisions shaped by the attributes of top executives? Research on these questions has faced two important challenges. First, it is difficult to quantify in a systematic but precise way the unexpected component of revenue shocks at the firm-level, while distinguishing it from anticipated changes in market conditions.

Education and avoidable costs in the stock market

April 27, 2022

This study investigates preventable financial mistakes by retail investors in the stock market and whether education helps reduce their likelihood. The paper examines the change in brokers’ commission schedules in the aftermath of the acquisition of Bolsa de Valores de Lisboa e Porto, the Portuguese stock market, by Euronext Group. The acquisition led to significant changes in the structure of brokers’ trading fee schedules penalizing small transactions, which were very common among retail investors prior to the acquisition.

Who waits for surgeries in Portugal?

April 4, 2022

Wait lists and wait times for scheduled surgery are common in National Health Services-type systems. The analysis of factors that impact wait times for access to surgery has been consistently focused on patients who underwent surgery, ignoring patients that had been on the wait list but did not benefit from surgery due to cancellation by the hospital. This paper studies the effect that cancellation episodes have on understanding wait times.

Being older among peers at school

March 30, 2022

Children start school at different stages of their social, emotional, and cognitive development. This paper investigates the effect of being one year older among peers on a series of relevant outcomes, exploiting differences in school starting age, using administrative records of every public-school student in Portugal. The paper shows that starting school 1-year later leads to significantly better performances in Math and Language exams in fourth, sixth and ninth grade. These differences mostly reflect cognitive maturity gaps, typical of children this age.

The experience of losing a job in different countries in Europe

March 22, 2022

This paper documents the consequences of losing a job across countries using administrative datasets from various European countries and the same empirical methodologies throughout the analysis. The paper shows that workers from Northern countries, such as Denmark and Sweden, experience the lowest earnings declines following job displacement, while workers in Southern countries, such as Portugal, Italy, and Spain experience losses three times as high. French and Austrian workers face earnings losses somewhere in-between (see Figure 1).

Coworker network effects on displaced workers

March 9, 2022

Between 30 and 50 percent of jobs are obtained through personal connections. Social contacts may contribute to reduce the incomplete information faced by workers when looking for a job (where are the good jobs?) or the asymmetric information faced by companies during recruitment (who is a good worker?). Despite substantial evidence on the widespread use of social contacts in various contexts, there is limited evidence on the extent to which they facilitate matching between workers and firms.

Wage flexibility under collective bargaining

February 17, 2022

In Portugal, there is almost universal coverage by collective bargaining with trade unions. This paper asks how this constrains firms’ ability to adjust wages to changing firm- and sector-level conditions. If wages are set by bargaining between trade unions and employers’ associations, and almost all workers are covered, it may seem that firms have no margin to adjust wages. However, collective bargaining in Portugal and in Continental Europe does not set the actual wage of workers, but rather minimum wage floors.

The short-term rental market and housing affordability

February 7, 2022

While beneficial for the economic recovery of Portugal, the rising trend as a tourist destination can also generate negative impacts in the population. One important concern is the rising costs of housing, particularly in the city centers. The authors collected data for the period 2011-2014 on Airbnb presence, house prices and rents to quantify the impact of Airbnb’s short-term rentals on housing affordability in Portugal. Caption: Transaction Prices, in €/m2, in civil parishes within Lisbon and Porto.

Lame duck politicians and fiscal policy

February 3, 2022

Does the introduction of term limits affect policymaking? Elections have a salutary disciplining effect as long as they urge politicians to act on behalf of the electorate. If politicians place too high a value on holding office, consequences may yet be pernicious. To boost their probability of re-election, politicians may end up favoring policies that are popular among voters instead of those they would otherwise promote. Once ineligible, they have fewer incentives to please the electorate.

Financial constraints and the executive gender gap

February 1, 2022

This paper investigates how financing constraints following the 2008-9 financial crisis affected executive pay and the gender pay-gap of executives, as well as the share of females in executive positions. The paper uses employer-employee data for Portugal, and exploits pre-crisis variation in external finance dependence across industries to estimate the differential effect of the crisis for more exposed firms - which relied more on external finance - relative to other firms.

Political cycles in municipal revenue forecasts

January 27, 2022

Recent studies suggest that governments use overly optimistic revenue forecasts to expand their fiscal room for maneuver in election years in order to increase their chances of re-election. This paper starts by providing a theory for this observation that is based on the assumption that uninformed voters mistake the fiscal activity of the government for competence. As a result, the budget is expanded in election years, but cut in off-election years.

Local property tax reform and municipality spending efficiency

January 25, 2022

Local governments provide a plethora of public services. To finance themselves, local municipalities rely on self-generated revenues, mostly on taxation. At the same time voters usually advocate for tax and expenditure limitations. Voters’ desire to lower the price while wishing to maintain the existing level of public services, can be interpreted as pressure on local governments for increased efficiency. This study assesses the short-term impact on municipal efficiency that stems from the 2008 property tax reform.

Long-term changes in wage inequality in Portugal and the modernization of the labor force

January 25, 2022

Wage inequality increased in Portugal for over 40 years starting in the beginning of the 1980s. The aim of this paper is to study the causes of the long-term trend in wage inequality in Portugal. Specifically, did wage inequality increase because the labor force became increasingly heterogeneous, or rather because wage differences between or within groups of workers expanded over time even if labor force heterogeneity did not change? The empirical analysis of this research is carried out with data from Quadros de Pessoal.

Evaluating fixed-term employment contracts

January 24, 2022

In February 2009, Portugal sought to promote the use of open-ended employment contracts by reducing the range of circumstances under which fixed-term contracts (FTCs henceforth) could be used by large firms. Before this date, new establishments were free to hire under FTCs. After February 2009, such flexibility applied only in the case of firms with fewer than 750 employees. Large firms could still hire under FTCs in new establishments in specific cases.

The real effects of FinTech lending on SMEs

January 10, 2022

Despite the attention that FinTech has received over the past years, the drivers and consequences of FinTech disruptive forces on financial markets remain open to debate. For example, an important open question relates to the impact that FinTech lending availability has on SMEs financing and investment policies. This paper addresses this question using a unique data set from a FinTech platform containing the universe of loan applications. The paper finds that FinTech serves larger, high profitability SMEs, who already have access to bank credit.

The human side of productivity

January 7, 2022

How much do the characteristics of a firm’s workforce matter for its productivity? Firms producing similar goods exhibit very different levels of productivity. Using the same amount of capital and number of workers, some firms produce much more than others. Over time, these performance gaps have widened in many countries. Such large and rising performance gaps suggest that substantial opportunities for boosting economic growth are being missed – if ’low’ productivity firms would adopt the best practices of ‘high’ productivity firms, the economy’s productivity would be much higher.

Bank credit allocation and productivity: stylized facts for Portugal

January 6, 2022

Long-term economic growth largely depends on the ability to channel resources to more productive firms, enabling them to invest and expand. Banks play a prominent role in resource allocation, especially in economies, such as the Portuguese one, which are heavily reliant on bank lending. The degree of efficiency in the allocation of bank credit can thus have major consequences for a country’s economic growth. This paper tries to shed light on two related questions.

Fluctuations in the wage gap between vocational and general secondary education

December 14, 2021

What type of education gives the best preparation for the labour market? Vocational education, where you learn the skills for specific occupations? Or a more general education, advancing intellectual and cultural development? It’s an old question in the economics of education literature. The common presumption is that vocational education gives an initial advantage, as the graduate has been trained for specific jobs, and can perform required tasks right-away, but that the general graduate is better prepared for future changes in the labour market, as broader intellectual skills facilitate learning new tasks.

Wage inequality and firm reorganization when firm competition changes

November 19, 2021

This paper studies how increased domestic product market competition induces firms to change their internal organization and how this change affects wage inequality. The paper exploits the Empresa na Hora (Firm On the Spot) program in Portugal as a quasi-natural experiment of a shock to competition. The paper uses detailed employer-employee data for the analysis. The main findings are that increased domestic competition following the “Firm On the Spot” program leads firms to flatten their hierarchies by delayering and that reorganization is accompanied by a reduction in within-firm wage inequality.

A policy evaluation of the reform "Empresa na Hora"

November 10, 2021

This paper studies the effects of the 2005 reform Empresa na Hora (Firm on the Spot) on firm entry, exit, and employment decisions. Before the reform, starting a business implied a long and convoluted bureaucratic procedure that would take between two to three months to complete. After the reform, the duration of this process decreased to less than one hour. It also involved a substantial reduction in the monetary costs associated with firm creation.

Factors influencing the demand for metro services in Lisbon

November 8, 2021

In 2017, according to the IMob 2017 Travel Survey, 59% of all passenger trips in Lisbon’s Metropolitan Area were made by private car, while public transportation accounted only for approximately 16% of trips. The dependence on private car for travelling in Portugal’s largest metropolitan area increased from 21% in 1991, to 40% in 2001, and 54% in 2011. In contrast, public transport use has substantially reduced, dropping from 56% of all passenger trips in 1991, to 38% in 2001, and 28% in 2011.

Serial entrepreneurs and the macroeconomy

November 8, 2021

Business dynamism has long been recognized as a key driver of aggregate outcomes, with startups and young firms playing a particularly important role. Seemingly small changes to the numbers and growth potential of startups may leave large and persistent footprints on the aggregate economy. In this paper, the authors argue that entrepreneurs themselves are key determinants of firm performance. Using Quadros de Pessoal, the paper defines serial entrepreneurship as the simultaneous ownership of multiple businesses.

Redistributive effects of monetary policy on labor income

October 26, 2021

In recent years, inequality has attracted a great deal of attention in monetary policy circles. A growing strand of the macroeconomic literature suggests that monetary policy is not immune to redistributive consequences, despite inequality not being an explicit target of its actions. The bulk of this debate centers around the relationship between monetary policy and asset prices, yet labor income represents a major source of inequality, and its relationship with monetary policy remains unexplored.

Voter turnout in municipal elections

October 19, 2021

Electoral participation in Portugal has been decreasing across all elections being below 60% in recent times. This study asks if the number of elected representatives in an election for Town Council is related with voter turnout. To motivate the analysis, the paper constructs an index that proxies for each voter’s voting power defined as the ratio of the number of seats in the Town Council to the number of voters in the municipality.

Self-employment and health outcomes

October 8, 2021

Is self-employment typically good for one’s health? This is an important question as a large number of people around the world and also in Europe are self-employed and many express concerns about the potential negative effects of this type of work. This research question also matters in the context of the Covid crisis. The COVID-19 pandemic may contribute to the growth of self-employment (as the labour market contracts and many individuals look to developed their own work opportunities).

Who should you vote for? Or, what makes a good mayor?

September 14, 2021

According to a survey ran by the Portuguese Electoral Behavior Project after the local elections in 2001 and 2005, around 50% of the Portuguese inquired voted for the party they preferred and did not take into account other characteristics of its head candidate. Bourdain (2008) explains that these electors voted for the party of preference and not the head candidate because they believed that being a representative of a given political party is the most important characteristic of a politician for policy outcomes.

Leaving school too early?

August 30, 2021

Reducing early school leaving, defined as leaving education with at most lower secondary schooling, is generally considered to be one of the top priorities of educational policy due to its significant social and economic costs. Increasing the Compulsory Schooling Law (CSL) leaving age is a policy that has typically been used to address this concern. The effects of the policy on students’ educational outcomes are still unclear, with the literature identifying mixed effects both on graduation probabilities and school track choices.

What factors explain the allocation of motorways in Portugal?

August 19, 2021

Transport infrastructure is an expensive investment and is considered to be an important driver of economic growth. Portugal’s road network remained of poor quality until the last quarter of the 20th century. The country had less than 200 km of motorways before joining the EU in 1986, whereas in 2017 it had the fifth and third highest endowments of motorways relative to population and GDP, respectively, in the EU. This study investigates the factors that influenced the allocation of motorways across municipalities in mainland Portugal between 1981 and 2011.

Surpluses in technology balance of payments and international competitiveness

August 17, 2021

Technology Balance of Payments (TBP) records the international trade flows of intangibles, namely money flows paid or received for the use of patents, licenses, knowledge, brands, models, designs, industrial research and development (R&D), and technical services, including technical assistance. Thus, the balance of the TBP reflects the ability of a country to sell/ acquire technologies from abroad. Does a TBP surplus determine the international competitiveness of a country. Such a surplus may increase with a country’s high degree of technological autonomy and a low level of technology imports.

The impact of R&D tax incentives in Portugal

August 4, 2021

Should governments intervene in the promotion of R&D and innovation? Are such policies effective? From a theoretical point of view, the answer to the first question seems consensual. In addition to the benefits from innovation at the firm-level, the fact that derived knowledge and new technologies can be disseminated throughout the economy, gives rise to social benefits that exceed private ones. As such, private R&D investment is usually lower than socially desirable, which justifies public intervention.

Corporate reorganization as labor insurance in bankruptcy

July 13, 2021

How does corporate reorganization affect labor outcomes in bankruptcy? The existing literature argues that corporate reorganization affects labor reallocation because it retains workers in bankrupt firms. One the one hand, firms can remain alive for too long and retain workers inefficiently. On the other hand, reorganization reduces the probability of inefficient liquidation. This paper tests the hypothesis that job contracts are a form of insurance in times of adversity; that reorganization improves labor outcomes because it reduces the probability that workers lose the insurance provided by job contracts when the costs of job loss are high.

Helping the government promote its policies

July 1, 2021

Governments around the world devote substantial resources to support small and medium sized firms struggling with the consequences of economic and financial crises. A key question is whether the firms that stand to benefit most from government programs—for example, smaller firms or those with limited access to traditional financing—face information frictions that hamper access to aid. This paper tests whether informational frictions prevent firms from accessing government support measures. The paper considers the impact of providing detailed information on two COVID-19 assistance measures—a layoff support program and a guaranteed credit line scheme—on firm take-up using a sample of over 170,000 Portuguese firms (see figure).

Bank pricing of corporate loans, short versus long maturities

June 25, 2021

From the sovereign debt crisis to the end of 2019, bank credit to Portuguese firms fell, spreads on new loans decreased and banks reported an increase in competition. The combination of these dynamics raises concerns that banks were underpricing loans. In a bid to remain competitive, banks may have offered loan spreads below the level needed to compensate banks’ equity holders for bearing risk. This paper studies whether the spreads on new corporate loans are sufficient to cover loans’ expected credit losses, operating costs and capital costs.

Quest for riches and the colonization of the “New World”

June 15, 2021

“Behold rich lands! May you know how to govern them well!” Hernández Puertocarrero to Cortés in 1519 How did the discovery of large deposits of gold and silver in the “New World” affect the world economy? This paper argues that the long-run consequences were not the same everywhere. In Western Europe, the colonizers par excellence – Spain and Portugal – suffered negative consequences in the long run. The Spanish government enjoyed increased revenues, but it squandered those revenues on ultimately unsuccessful European wars.

Public-private partnerships in health care services

May 25, 2021

This research compares Portuguese hospital public-private partnerships (PPP) with the corporatized hospitals (EPE) regarding their social performance, between 2012 and 2017. The research accompanies a line of inquiry on whether hospital PPPs are more or less efficient than the traditional model of managing hospitals by focusing on the social side of health care. There is a generalized idea in the public that this type of partnership translates into ruinous contracts for the public purse and poorer health care services.

Motorways, urban growth, and suburbanization

May 20, 2021

Portugal moved from having less than 200 km of motorways before joining the European Union in 1986 to having, according to the Eurostat, the fifth highest endowment of motorways relative to population in 2017, and the third relative to GDP in the Union. This paper studies the relationship between the expansion of the Portuguese motorway network between 1981 and 2011 and the growth of population and employment across mainland municipalities.

Indebtedness in export-led SMEs

May 17, 2021

This study finds that Portuguese small and medium enterprises (SME) with a higher degree of export intensity rely more on internal funds. This finding arises from examining the determinants of corporate leverage on a sample of 7,676 Portuguese SMEs and by focusing on the impact of export intensity on firms’ capital structure. In addition, the analysis reveals that more profitable SMEs and those with more asset tangibility and business risk have lower debt ratios, but that SMEs with larger growth opportunities (measured either by sales growth or the ratio between CAPEX and total assets) are more levered.

Recovery and exit of zombie firms in Portugal

May 7, 2021

This paper estimates that a 1% decline in the share of highly indebted and unprofitable mature firms (i.e. zombies) increases the average labor productivity by 3.1 percent. In well-functioning markets, competition is expected to force zombie firms to restructure or exit. However, in many instances, these firms have a tendency to remain zombies. Aggregate productivity is therefore impaired by reduced allocative efficiency and negative externalities on investment and entrepreneurship.

Electricity prices for better yet sustainable economic performance

May 5, 2021

Energy efficiency is considered pivotal for long-term economic growth, especially since much of the energy consumed in Portugal has historically been from non-renewable sources. According to the theory of directed technological change, whether firms are likely to develop and adopt technologies to increase the marginal productivity of energy (controlling for other production inputs) is decided by two counteracting effects: the price effect and the market-size effect. The price effect (often adopted by governments) tries to induce improvements in energy efficiency by imposing (through regulation) a higher energy price.

Small- and medium-sized enterprises and the financial crisis

May 5, 2021

This article studies the growth determinants of small and medium-sized firms (SMEs) before and after the 2008 subprime crisis. SME’s growth correlates positively with firm-level cash flow and GDP, whereas it correlates negatively with firm-level debt, firm size and age, as well as with the economy-wide risk-free interest rate. After 2008, the financial crisis with the associated implementation of austerity measures in the Portuguese context, produced a negative effect on SME growth.

Worker reallocation and firm innovation

April 24, 2021

The extraordinary increase of Chinese exports over the past two decades has represented a new source of competitive pressure for European firms. In this context, innovation and investments in knowledge are considered as a protection against import competition from low-wage countries. Given that wage differences are large and take time to respond, competing on costs is not always a feasible option. This paper examines whether firms in Denmark and Portugal escape import competition through innovation by either internally reallocating their non-R&D workers to R&D jobs, hiring new workers for R&D activities, or doing both.

Time overruns in public projects

March 31, 2021

Public projects tend to be perceived as having substantial cost and time deviations and overruns, i.e., with project final cost higher than forecasted and with project completion after the forecasted deadline. This paper studies the causes for such deviations from forecasts. It focuses on project-related (endogenous) reasons such as the investment amount and the sector of investment, and on (exogenous) reasons of political, legal, regulatory, and economic nature that include a dummy for government majority, a variable indicating the political leaning of the government, a dummy for the new procurement law of 2008, the rule of law and the corruption index, and GDP growth, inflation, along with dummy variables for the financial crisis and the intervention of the Troika.

Side benefits of promoting entrepreneurship

March 30, 2021

Are there societal side benefits to encouraging entrepreneurship? This study answers this question by looking at the effects of a policy promoting new firm creation on crime levels within municipalities. Between 2005 and 2009, the Portuguese government gradually introduced a deregulation reform (“Empresa na Hora”) in 144 out of 308 municipalities. In the municipalities targeted by this reform, the costs of establishing a firm declined drastically: it took just one hour and about 300 euros to become an “entrepreneur”.

When does remote work boost productivity?

March 13, 2021

The COVID-19 pandemic has forced many workers to work from home. Even before this emergency shift, there were societal calls for allowing workers location and time flexibility to achieve a better work-life balance (e.g. EU Directive 2019/1158). While there may be social benefits from working at home, research on the impacts of remote work on worker productivity and firm profitability shows contradictory results. This paper studies the impact on worker productivity of a precondition for remote work, namely the possibility to access firm resources remotely.

Where are the expensive housing rental rates in Portugal?

March 13, 2021

This paper analyzes housing rental rates at the parish level within municipalities. The analysis explores spatial patterns of housing rents in 4049 Portuguese parishes across 278 municipalities using data from the 2011 Population and Housing Census from the Portuguese National Institute for Statistics. Housing rental rates tend to be higher in parishes with greater population density (measured by the number of citizens living per square kilometer), a higher number of dwellings, and greater potential sustainability (measured as the ratio of working-age population-between 15 and 64 years-to elderly population-aged 65 and over), better mobility (measured as resident population employed outside the territorial unit plus employed non-resident population in the territorial unit divided by employed resident population), and a higher social-diversity ratio (measured as a weighted average of each socioeconomic group), besides the dwelling’s useful area in square meters.

Portuguese firms’ financial vulnerability and excess debt in the context of the COVID-19 shock

March 8, 2021

The economic shock prompted by the COVID-19 pandemic strongly restricts Portuguese firms’ ability to generate profits, contributing to an increase in their financial vulnerability and undermining their capacity to meet credit commitments in the short and medium term. This paper assesses the impact of the COVID-19 pandemic on the debt levels of vulnerable firms. Firms are defined as financially vulnerable if their operating profits are less than twice the amount of interest expenses.

Has investment in wind energy impacted local labor markets in Portugal?

March 1, 2021

Investment in wind power has grown remarkably in the past decades in Portugal (see figure). Although economic development is an argument for investment incentive policies, little evidence exists as to their net impact on local-level unemployment. Despite project-level estimates of direct employment creation, doubts remain as to whether these effects translate into an increase in overall employment - rather than a displacement of resources - as well as into effects at the local-level rather than at the aggregate level only.

Dream jobs

February 12, 2021

What makes some jobs better than others? The positive effect that a ‘good’ job has on lifetime wage income may be due to a wage jump upon taking the job (i.e., a static effect) or to a faster wage growth after taking the job (i.e., a dynamic effect), and may depend on whether the benefits are portable to another job, as well as on the quality of the match between occupation worker’s skill and ability.

What drives exceptional job creation in Portuguese companies?

February 12, 2021

It is generally recognized in the economic literature that a small number of companies, known as Gazelles, contribute disproportionately to net job creation. This article analyzes the drivers of high employment growth such as firm age, access to external sources of finance, and firms’ human capital, as well as companies’ ability to export and innovate through investment in R&D. The results suggest that younger companies are more likely to grow faster, and that human capital is an essential determinant of high growth phenomena.

A taxonomy of productivity growth in Portugal

February 2, 2021

Technologies such as computers, robots, and artificial intelligence are changing how we work and interact, rendering routine jobs (which are also middle-wage jobs) obsolete due to automation and computerization of many tasks. In contrast, high-skilled workers that do complex abstract tasks benefit from this, as technology increases their productivity. There is evidence that several labor markets have polarized in the past two decades between high-skilled abstracted jobs and low paid jobs (with the simultaneous disappearance of routine middle-skilled jobs).

Household indebtedness in Portugal from 1961 to 2011

January 22, 2021

Household indebtedness in Portugal has drastically increased in the last 30 years, with households’ indebtedness at around 20 per cent of disposable income in 1990 increasing to 118 per cent of disposable income in 2004. Some of this indebtedness is due an increased demand for housing. For a while rental rates were frozen, disincentivizing the rental market, while successive Portuguese governments helped low-income households into housing through the Crédito Bonificado program.

The repercussions of the 2011 VAT increase on the tourism industry

January 4, 2021

Does a significant increase in VAT rates harm the tourism industry and if so how much? This paper investigates the consequences of a large increase in VAT rates on firm profitability and survival. In 2011, the Portuguese government increased the VAT by ten percentage points on catering services, restaurant meals, and beverages. The tourism sector in Portugal represents the biggest sector of the economy, and is composed of many small and medium-size firms, which are generally affected the most by such tax changes, at the same time being essential contributors to job creation and economic development.

Export-led growth in Portugal after the COVID-19 pandemic

December 8, 2020

The COVID-19 pandemic has led to a significant decline in demand in Portugal and elsewhere in the world. In Portugal, private consumption is projected to fall by 8% in 2020 and investment spending by 11%. Furthermore, private consumption growth over the long-run is likely to remain low due to ageing demographics of the Portuguese society: its old-age dependency ratio is at 40%, already 10% higher than the OECD average. Where then might an increase in aggregate demand come from?

Was local government efficiency affected by the Troika’s intervention in Portugal?

December 1, 2020

A decentralization process is underway in Portugal with the increased attribution of competencies to local governments hoping to benefit from efficiency gains. However, during the Troika intervention, the austerity measures adopted by the Portuguese government impacted the functioning of local administrations. This paper studies the efficiency in local governments and its drivers and provides empirical evidence about the impact of Troika’s intervention on the Portuguese municipalities. The paper evaluates the efficiency of the 278 mainland municipalities by relating the cost of providing public services to the quantity of services provided.

Product market decisions and product quality in the wine industry when financial constraints hit

November 4, 2020

Barriers in access to finance (i.e., financial constraints) have been shown to affect real decisions of companies such as innovation, investment in fixed capital, and employment. This paper studies whether financial frictions affect one of the most central corporate decisions – which products to produce (i.e., product mix). The hypothesis is that firms adjust their product mix in order to generate cash flows faster. As different products have different production cycles and generate cash-flow at different points in time, companies may adjust their product mix in order to shorten the cash-flow maturity.

I feel wealthy: house prices and household indebtedness

October 11, 2020

Increases in house prices are known to stimulate households’ consumption. Since residential property is an illiquid asset, households may have to increase debt to adjust their current expenditure to their new perceived wealth. This study is particularly relevant given the recent significant rise in property values in Portugal pre COVID-19. This paper relies on microdata retrieved from the first wave of the Household Finance and Consumption Survey to examine the response of household debt to households’ perception of their residential properties’prices.

Sovereign distress and the credibility of deposit insurance

October 9, 2020

Deposit insurance arrangements are crucial to mitigate the likelihood of bank runs. However, the success of these protection schemes depends on their credibility, which explains why they are usually guaranteed by the sovereign. But what happens when the sovereign is also in distress? Can the sovereign backstop actually weaken the credibility of deposit insurance mechanisms in some circumstances? This paper examines two episodes that occurred during the euro area sovereign debt crisis (2010-2013) to better understand the role of the credibility of the sovereign backing the deposit insurance arrangements.

The impact of minimum wage policies in financially distressed firms

September 19, 2020

The Portuguese government promised to increase the minimum wage to 750 euros by 2023. If this goal is achieved, between 2014 and 2023 the nominal minimum wage will have increased 55%. The final objective of this measure is to reduce poverty and income inequality. However, it implies additional costs to firms and customers. When many firms are already under pressure and living in a context of high uncertainty due to the covid-19 pandemic, the announced minimum wage increases cast further doubts on the evolution of employment and on the financial condition of firms.

Corporate governance and financial policies of Portuguese family firms

September 17, 2020

Many businesses in the global economy are family firms. How do family firms differ from non-family firms with regards to corporate governance and financial policies? Current literature on the issue of corporate governance and financial development provides evidence that family firms adopt different financial practices from their non-family counterparts. Private family firms are at an advantage in terms of management experience and governance and a disadvantage when it comes to obtaining long-term debt and external equity.

Discrimination against same-sex couples in the Portuguese rental market

September 14, 2020

A correspondence-based field experiment was carried out in the Portuguese housing market to determine whether same-sex couples are treated differently than opposite-sex couples. This is the first study of its type to explore the relation between discrimination and religiosity. In this experiment, fictitious couples replied to real housing ads in the metropolitan areas of Porto and Lisbon via e-mail. The applicants are portrayed as married, having stable income and professions. Some of them are opposite-sex couples, others same-sex couples (female or male).

Competition in the over-the-counter drug market after deregulation: evidence from Portugal

August 3, 2020

In 2005, Portugal allowed over-the-counter (OTC) drugs to be sold outside pharmacies, namely in supermarkets and outlets (parafarmácias). The rationale for OTC market liberalization was simple: the entry of new retailers, combined with free pricing, would lower OTC prices via increased competition. This paper examines whether the entry of new, non-pharmacy OTC retailers triggered price reductions by incumbent pharmacies. The analysis uses data on the prices of five popular OTC drugs at all retailers located in Lisbon, for periods after OTC market liberalization.

On-site inspecting zombie lending

July 6, 2020

Zombie firms have received a lot of attention from academics and policymakers in the aftermath of the last global financial crisis. These are firms that are non-viable, but they remain artificially alive through the rollover of bank loans. This typically happens in low interest rate environments, when banks have fewer incentives to recognize losses in their balance sheet. By lending to these zombie firms, banks are not allocating scarce funding to firms with viable projects, thereby leading to a misallocation of resources in the economy.

What and how did people in Portugal buy during the Great Lockdown period?

June 22, 2020

While experts had warned about the likelihood of a pandemic given the increasing frequency of outbreaks in this century, SARS-CoV-2 caught the world largely unprepared. Over the last century, pandemics have been responsible for more deaths than armed conflicts. Their impact on economic activity is also overwhelming. This paper presents early evidence of the impact of the covid-19 pandemic on the Portuguese economy. The paper uses novel and comprehensive data on electronic payments from SIBS, the main provider of point of sale terminals and on-line payments in Portugal.

The disposition effect among mutual fund participants in Portugal

June 11, 2020

The disposition effect is the propensity of investors to sell assets on which they have experienced gains and to hold assets on which they have faced (unrealized) losses. This paper studies the disposition effect among mutual fund participants in Portugal. Using a large sample of transaction-level records from a major bank for the period from 1998 to 2017, this paper finds evidence of a strong disposition effect among mutual fund investors in Portugal.

Labor productivity in state-owned enterprises

June 2, 2020

As a measure of austerity in the aftermath of the Global and Financial Crisis (GFC), the Portuguese government revoked four holidays for both public and private employees: two civilian (Republic Day and Restoration of Independence) and two religious (Corpus Christi and All Saints Day) holidays. A plausible motivation for canceling the two holidays was to increase the number of working days and thereby lowering labor costs. The move was effective starting in 2013 and was presented as a measure to increase productivity among public employees.

Determinants of total factor productivity in the Portuguese quaternary sector

May 6, 2020

This paper studies total factor productivity (TFP) of the quaternary sector, or knowledge-based activities sector. The occupations associated with this sector are linked with knowledge and social/creative intelligence. These activities are admittedly less likely to be automated in the future due to their human heuristic requirements. A descriptive analysis of a firm-level dataset of Portuguese firms shows that this group of activities differs from others along several characteristics: the share of gross value added, capital per worker, and wage expenses.

Doctors’ response to queues: evidence from a Portuguese emergency department

April 5, 2020

This study analyzes how emergency room doctors change their behavior when the waiting room is crowded. Resources in a fast-care setting such as emergency departments are limited (namely physicians’ time), and so it is important to study the extent to which those restrictions reflect on lower provision of care when more patients are waiting. The paper evaluates doctors’ response to an increase in the number of people waiting on three different dimensions: time spent with patients, number of exams and lab tests during the patient’s visit, and likelihood of being sent home or to a primary care facility rather than being treated at the hospital.

PhD funding and time to PhD completion in Portugal

March 25, 2020

This paper investigates the impact of PhD funding on the time to PhD completion, using data of PhD holders working in Portugal. Time to PhD completion has been a major cause for concern for research funding agencies, universities, academics, and doctoral students facing increasingly constrained labor markets, particularly in academia. The Higher Education Funding Council for England reported that, in 2013, around 73% of those starting Ph.Ds. in 2010/11 were projected to take 7 years to receive the degree, while in the USA all fields of knowledge reported median times of more than 6 years to complete the Ph.

Are training grants a useful policy to increase productivity? (A policy suggestion during the coronavirus pandemic.)

March 16, 2020

Recent research by the European Investment Bank indicates that workers in Europe spend less than 0.5% of their working time on training. This figure seems too low and indeed there are good economic reasons to suggest some degree of under-provision of training. First, training is expensive for firms, as it entails significant direct and indirect costs. Second, employers know they will lose their investments in training if employees subsequently leave.

Life-cycle consumption in Portugal

February 26, 2020

How does personal consumption evolve over the life-cycle? According to the permanent income/life-cycle theory of consumption, primarily associated with Milton Friedman and Franco Modigliani, the answer to this question is that consumers try to smooth consumption over time, with significant adjustments occurring only in the event of permanent shocks to income. Empirical studies of consumption behavior, however, tend to find that consumption presents a hump-shaped pattern, mimicking the life-cycle pattern of income.

Non-performing loans and bank lending: evidence for Portugal

February 21, 2020

In the wake of the international financial crisis and the sovereign debt crises there has been a pronounced and increase of non-performing loans (NPLs) with the potential to impact banks’ supply of credit and ultimately economy-wide growth. This is a relevant topic in many European Countries, including Portugal, where in mid-2016 NPLs accounted at one time for almost 18% of banks’ total loans. The paper analyses the impact of Portuguese banks’ NPLs on their loan supply to non-financial corporations (NFCs) in the 2009-2018 period.

Reducing corporate taxes triggers high-quality entrepreneurship

February 13, 2020

This paper investigates the impact of corporate taxes on entrepreneurial activity using a quasi-natural experiment in Portugal. Before 2001, the corporate tax rate levied on start-ups in Portugal was 34%. The “Portuguese Tax Benefits for Inland Regions” (Benefícios Fiscais à Interioridade) implemented in 2001 reduced the corporate tax rate to 25% for all start-ups located in inland regions. After 2004, the tax rate was further reduced to 15%, and after 2007 it was reduced to 10%.

Residential price premiums for energy efficiency

February 5, 2020

This paper addresses the question of whether increased energy efficiency, as measured by the Energy Performance Certificate (EPC), has an impact on the transaction price of residential properties in Portugal. The investigation of the relationship between the EPC label and residential property prices is carried out through the econometric estimation of an hedonic price model, which has been used as the workhorse model of house prices. Using a dataset of 256,000 residential property sales for Portugal, this paper estimates a price premium for energy efficiency.

Assessing the legal value added of collective bargaining

January 30, 2020

Collective bargaining – the negotiation about working conditions between one or more employers and workers’ representatives – can improve wages, working time and various other dimensions of employment. Successful bargaining that takes into account the characteristics of the firms and workers involved can also increase engagement and stability, improve productivity and profitability. This paper investigates the extent to which collective bargaining in Portugal has changed any employment dimension, over and above existing statutory labor laws.

Finance and labor rigidity in Portugal

January 7, 2020

How do credit shocks affect firms’ employment adjustment and exit? How does the propagation of these shocks depend on labor rigidities? Do credit shocks reinforce or hinder productivity-enhancing reallocations in the real economy? According to the classic Schumpeterian view, shocks should bring about creative destruction and a “cleansing effect” on the real economy. However, financial frictions might attenuate or even reverse this, thus leading to “scarring”. The contribution of the paper is to exploit the exogeneity of a credit shock to Portugal to analyze these contrasting issues, and document how the responsiveness of firms to credit shocks depends on labor rigidities.

Aging and the compression of disability

December 15, 2019

The age composition of the population in higher income countries has changed considerably. Signs of population aging have prompted concerns about its effects on the cost of health care systems. As people are living longer are they living healthier? On the one hand, the hypothesis of life extension, proposes that we are living longer but in poorer health. On the other hand, the optimistic hypothesis of “morbidity compression” proposes that as we live longer we spent less time in poor health.

Corruption and economic growth: the case of Portugal

December 3, 2019

In the 2017 Special Eurobarometer on Corruption, 92% of Portuguese respondents stated that corruption is a widespread problem in their country (EU average: 68%) and 70% of businesses agreed that the only way to succeed is to have political connections. At the economic level, and since the beginning of the 21st century, economic growth has been dismal, resulting in a divergence from the average per capita income in the EU. Whether corruption is a threat or an opportunity to economic growth remains however an open question.

Literacy and primary school expansion in Portugal: 1940–62

December 3, 2019

In Portugal, in 1940, only 40% of the population knew how to read. The causes of this backwardness, as well as the the rapid increase of literacy rates in the subsequent decades have been the focus of considerable research, and some controversy. This paper measures the contribution of the increase in the number of primary schools since the 1940s to the increase in school enrolment and literacy rates by the beginning of the 60s.

Sovereign exposures in the Portuguese banking system

November 27, 2019

The euro area sovereign debt crisis exposed the linkages between banks and sovereigns and their adverse implications. In 2010, when sovereign spreads rose in several countries, tensions swiftly transmitted to the banking sector, uncovering the intertwining of banks’ and the respective sovereigns’ creditworthiness. Against a backdrop of already fragile fiscal positions, public finances in some countries were hampered by government support to banking institutions to avoid further systemic stress. These transmission mechanisms were reinforced during the crisis because, as sovereign distress intensified and led to loss of market access in some countries, banks substantially expanded their holdings of domestic sovereign debt.

Can ATMs get out the vote?

November 19, 2019

This paper reports on a large-scale (randomized) field experiment designed to assess ATMs’ (automatic teller machines) capacity to “get out the vote”, an unexploited method of voter mobilization. The experimental design used the full universe of functioning ATMs in Portugal, which benefits from a sophisticated world class system with wide national coverage. The experiment randomly selected a set of treatment civil parishes, where a civic message took over the totality of ad time in ATMs, and compared with a set of control civil parishes where advertisements ran as usual.

Does foreign presence induce host country firms’ exit? The case of Portugal

November 1, 2019

Multinational enterprises are a significant contributor to the world economy as evidenced by indicators of foreign affiliate activity such as sales, employment, exports, value added and assets. This paper studies their role as agents of competition using the Portuguese economy. Multinational activities might affect the host country industry dynamics due two main opposing effects. On one hand, the presence of foreign firms may induce less efficient domestic firms to exit the market (a crowding-out effect) through, for example, aggressive business practices of foreign firms (e.

Potentially hidden unemployment in the Portuguese labor market data

October 8, 2019

The unemployment classification relies on the degree of attachment to the labor market, based on the job search criterion. An individual aged between 15 and 74 years-old is considered to be unemployed if he or she is not working, but is actively searching for a job and is available to start working within the next two weeks. Several studies have highlighted the arbitrariness of the unemployment classification criteria used in the Portuguese Labor Force Survey, considering that the non-employed population is a heterogeneous group.

Evaluating the effects of the soda tax on prices and consumption in Portugal

October 3, 2019

More than 40 countries around the world and a handful of American cities have introduced, or are considering introducing, soda taxes. In addition to raising tax revenues, these instruments aim to reduce the consumption of products whose prices do not reflect their true social costs, by making them comparatively more expensive (and increasing awareness about the negative effects of their consumption). Tobacco and alcohol taxes are classic such examples. The same rationale applies to soda (and other unhealthy foods and drinks): excessive sugar intake from soda is associated with higher prevalence of diseases such as obesity and diabetes, with the costs of treating these diseases falling on everyone.

The China shock and employment in Portuguese firms

September 30, 2019

China’s rise as an export powerhouse has impacted labor markets across the Western world – but the effects appear to differ dramatically across countries. We evaluate the impact of rising Chinese exports on employment in Portuguese manufacturing industries by looking at both direct competition in the Portuguese market and indirect competition in Portugal’s largest export markets in Western Europe (Germany, Spain, Italy, France , and the UK). In addition, we explore how Portugal’s stringent labor market regulations might have shaped those responses.

The impact of international migration on the Portuguese public pension system: a scenario analysis

September 27, 2019

Migration might constitute one possible pathway to mitigating the effects of the aging population on the financial stability of pension systems as migrant flows tend to present younger age-structures than their receiving countries. While this argument was proposed a few decades ago and subject to discussion ever since, there have only been a few empirical studies striving to assess the role of migration in the financial sustainability of public pension systems.

Local territorial reform and regional spending efficiency

September 12, 2019

Quite often, one encounters arguments advocating that mergers or amalgamation of territorial units are a pathway to reduce public spending and increase efficiency, pointing to advantages of economies of scale in the provision of public services. However, this article argues that these advantages might have been oversold. The article assesses the changes on municipal efficiency that stem from the 2013 Portuguese local territorial reform that reduced the number of local governments and parishes by around 29%.

Selection of projects to the Portuguese innovation incentive system

May 31, 2019

It is often argued that public policies to support investment and innovation play a vital role when firms have difficulties in accessing external finance. However, several studies have demonstrated that public support can have no effect on the policy targets or even have a negative effect on firm performance. One explanation for these findings could be the selection process to participate in public support programs. The aim of the article is to assess differences in investment project characteristics (expected impact) between firms with approved and non-approved applications and to understand which kinds of projects are selected for a subsidy.

Private saving determinants in Portugal

May 27, 2019

The combination of projected expenditure increases in the Portuguese public pension scheme and low rates of private saving constitutes a policy challenge, not least because the former may be associated with the later. The impact of public pension wealth on private saving has been widely studied since the late 1970’s, yet no consensus on the topic has been reached so far. Some authors find evidence that public pension wealth impacts negatively private saving, others argue that the effect is not statistically significant.

Where did the money go? Why did Southern and peripheral European countries fair so poorly during a period of large capital inflows from the rest of Europe?

March 19, 2019

TFP and value-added gains from an efficient allocation of resources between 1996 and 2011. Weak or even negative productivity growth is a major reason for the poor economic performance of most Southern and peripheral European countries, including Portugal, in the 2000s. This weak, or even negative, productivity growth happened at the same time that the Eurozone became more financially integrated, which is something that was expected to improve resource allocation efficiency, facilitate risk sharing, and boost economic growth.

The best masters theses on the Portuguese Economy in 2018

March 7, 2019

The Bank of Portugal in collaboration with the Fundação Manuel dos Santos organizes every two years a competition to select the best masters theses written on the Portuguese Economy from across all higher education institutions in Portugal. At the _9.ª Conferência Desenvolvimento económico português no espaço europeu _16 theses were presented. The thesis “Estimating Gender Differences in the Probability of Unemployment: Evidence From Portugal” by Joana Passinhas from ISEG won the 2018 Prémio José da Silva Lopes, awarded by the Bank of Portugal to the best thesis.

Labor market effects of the Portuguese unemployment insurance reform

March 7, 2019

The Portuguese labor reform of 1999 increased the maximum duration of unemployment benefits only for workers in specific age brackets. Workers with ages outside of the affected brackets had no change in the maximum benefit duration. Workers between 30 and 34 years old, for example, had the maximum benefit duration extended from 15 months to 18 months. But for workers between 35 and 39 years old, the maximum benefit duration was unchanged at 18 months.

Migrant networks and the export performance of Portuguese firms

February 20, 2019

Fixed costs associated with learning about demand and setting up distribution networks are expected to be lower when there are more potential contacts in the destination market, suggesting a greater probability of market entry and larger export revenues. This paper matches historically-determined emigration stocks with detailed firm-level data from Portugal to examine the effect of migrant networks on export outcomes. Portugal offers unique historical features for this analysis. First, the motives and timing of the sizable emigration flows observed in the country during the _Estado Novo _authoritarian regime, along with their steep fall in the aftermath of the democratic revolution of 1974, alleviate concerns of reverse causality.

Successful exporters learn about external demand and deliver on product quality

February 20, 2019

How and why firms become successful exporters? To answer this question, the paper examines the joint evolution of export revenue, and input and output prices over the firm’s life cycle. Using detailed micro data from the Portuguese manufacturing sector, the paper finds that export revenue tends to rise with experience in export destinations, and that successful firms that export for longer periods to a destination tend to ship larger quantities at lower prices to that market, while using more expensive inputs.

The effect of competition by Chinese exports in international markets on the Portuguese labour market

February 19, 2019

Chinese exports may affect a given country directly through intensifying competition in the domestic market, but also indirectly in foreign markets where firms from that country compete with Chinese exports. In fact, the large export market share gains of China in low-tech, low-skill products, like textiles, clothing, footwear, and electric appliances, were accompanied by losses in the export shares of several other countries, like Portugal. These indirect effects of competition in third-country export markets are the main object of this study; they can be significant given the growing sophistication of China’s exports, implying greater competition in virtually all industries in which developed economies operate.

Exchange rate shocks with the Brexit referendum and Portuguese exports

November 22, 2018

Understanding the effect of exchange rate movements on international trade is a major issue for economists and for policy-makers. Using a quasi-natural experimental evidence on the effects of exchange rate shocks on export prices, quantities and export participation, the paper examines the consequences of the large, sudden and unanticipated plunge in the British pound following the Brexit referendum. As figure 1 shows, the pound depreciated sharply against the Euro after the referendum and it has stayed more or less at that level since.

Microcredit repayment in Portugal

October 27, 2018

This research examined the determinants of microcredit loan repayment based on a sample of 752 microcredit loans granted in Portugal by the National Association for the Right to Credit, adopting individual lending mechanisms and granting loans through partnerships with several credit institutions. This is the first study to ascertain the influence that a set of factors – grouped into three categories: borrowers’ individual characteristics; loan characteristics; and characteristics of business projects implemented by borrowers – has on the repayment ability of microcredit programs, in a developed country of the Eurozone experiencing the financial hardships of the 2008-2009 crisis.

Productivity of Portuguese cooperatives

September 13, 2018

In many countries and industries, cooperatives constitute a significant share of activity. Despite this widespread presence, there is little evidence on the merits of this organizational form with respect to productive efficiency relative to the more dominant way of organizing production through investor-owned firms. In this paper, we contribute towards answering the long-standing question of whether cooperatives are more or less efficient than investor-owned firms by providing empirical evidence from Portugal.

Innovations in digital government as business facilitators: international evidence and implications for Portugal

June 25, 2018

Administrative and regulatory burden reduction has become a priority to improve governmental efficiency and economic competitiveness. Innovations in government through Information Communication Technologies are seen as key tools in designing policies to achieve those goals. Although Portugal has been improving in the business environment and electronic government development indicators and considered a top reformer in some international reports, it is still far from the best-performing countries in several dimensions. Using a large panel dataset, covering 174 countries from 2004 to 2016, we investigate a possible contribution of innovations in digital governments to facilitate business,and extract implications for Portugal.

Open innovation in Portuguese firms

June 5, 2018

There are increasing open innovation trends threatening, but also creating opportunities to Portuguese firms. Open innovation includes the systematic encouragement and exploration of a wide range of internal and external sources for innovative opportunities, the integration of this exploration with firm capabilities, and the exploitation of these opportunities through multiple channels. This study aims to identify the sectors whose firms most engage in open innovation and which sources/agents of innovation are most used.

Debt financing and internationalization of Portuguese SMEs

June 4, 2018

This paper examines the relationship between the capital structure of Portuguese small and medium enterprises (SMEs) and their export performance. The Portuguese industrial firms are of great importance for the domestic economy and played a significant role in the country’s economic recovery amid the recessionary environment of the last decade. Being smaller and privately owned, and thus with less publicly available information, SMEs tend to face greater agency and asymmetric information problems that impact investment and performance generally, and export performance more specifically.

A lower VAT rate on electricity in Portugal

June 4, 2018

In late 2011, Portugal increased the statutory VAT rate on electricity from 6% to 23% as part of the austerity plan under the country’s international bailout. Naturally, this austerity measure met with widespread concern for its potentially negative effects on both economic performance and social justice. Seven years after its introduction, the country is facing a brighter economic outlook and a more positive outlook for its public finances. Nevertheless, there is no sign that authorities plan to reinstate the reduced VAT rate.

Hiring older workers in Portugal

April 24, 2018

This paper asks why companies retain older workers while not hiring older workers in Portugal. The Portuguese case is particularly relevant to study this question, because the level of participation of older workers in the labor market is at least twice as high in Portugal when compared to European countries. Using unique matched employer-employee data of 2007, from Quadros de Pessoal, this paper examines the determinants of hiring individuals aged 50 and older.

Socioeconomic determinants of forest fires in Portugal

April 24, 2018

A significant fraction of forest fires in Portugal has human origin, either because of negligence or unadjusted forest practices or as consequence of criminal actions. This paper studies the social and economic factors that may influence the occurrence and the extent of fires in Portugal. This question is particularly relevant considering the many fires occurring each year and the economic and humanitarian consequences of these fires. The study uses data from 278 Portuguese municipalities between 2000 and 2011.

The effect of mass influx on labor markets: Portuguese 1974 evidence revisited

April 12, 2018

The study of how labor supply shocks, especially immigration, affect labor market conditions has been a long-lasting concern in empirical labor economics. The textbook model of a competitive labor market suggests that high levels of immigration should lower the wage of competing workers. Despite the common sense intuition behind the theory, existing empirical literature offers contradictory evidence. This article provides a reappraisal of the evidence from the influx that has been unique in the recent European history, the flood of more than half million returnees from Mozambique and Angola to Portugal in the mid-1970s.

Zombie companies in Portugal: the non-tradable sectors of construction and services

March 23, 2018

This paper studies the prevalence and economic consequences of zombie companies in Portugal, specifically in two major sectors of activity, construction and services. These sectors are less exposed to external competition and zombie companies may remain due to reduced competitive forces. Zombie companies are supported by easy credit access and low interest rates and would fail in other market conditions, all else equal. Specifically, zombie companies are those operating for more than 10 years that have an interest coverage ratio lower than 1–signifying that interest expense is at least as large as company earnings–for at least 3 consecutive years.

Fish processing in Portugal: an industry in expansion

March 8, 2018

This paper presents an analysis of developments in the Portuguese fish processing industry from the 1960s to the present as well as prospects for future expansion. In this period, Portugal has undergone tremendous political and macroeconomic changes. While Portugal used to be nearly self-sufficient in the supply of fish, the country has become a net importer of this commodity. These changes have also affected fish processing. Moreover, the development of the industry has been promoted in several different ways both by the EU and the government of Portugal.

Does the stock market cause economic growth? Portuguese evidence of economic regime change

March 7, 2018

This research tests the relation between stock market and economic growth for Portugal using data from 1993 to 2011. Because Portugal is a small open economy traditionally dependent on bank financing, we also consider the relation between bank financing and economic growth. The empirical approach focuses on the study of the relation between stock market and bank financing with economic growth in Portugal, but also identifies structural changes on these relations during the period of study.

An economic analysis of the Portuguese fisheries sector 1960–2011

March 2, 2018

This paper undertakes an economic analysis of the Portuguese fisheries sector and fish markets for the period 1960–2011. In this period, the Portuguese economy underwent significant change as well as was subject to numerous external shocks. The main shocks include the revolution of 1974, substantial emigration as well as immigration, membership of the European Union in 1986, and the adoption of the Euro in 1999. The fisheries sector was exposed to a major shock of its own: the introduction of 200 mile Exclusive Economic Zones in 1977 essentially lead to the demise of Portugal as a Distant Water Fishing State (DWFS).

Case study: DBRS sovereign rating of Portugal: analysis of rating methodology and rating decisions

February 26, 2018

This paper examines the DBRS sovereign credit rating methodology and its rating decisions on Portugal. The paper identifies country-specific risk factors and technical specifications that justify the agency’s issuance of Portugal’s investment-grade notation throughout the sovereign debt crisis - which preserved Portugal’s access to the ECB bond purchase program. Both qualitative and empirical findings show that DBRS had a comparably lenient rating approach to Portugal within the DBRS cross-country rating decisions as well as in comparison to other rating agencies.

Drug decriminalization and the price of illicit drugs

January 10, 2018

_One moderate alternative to the war on drugs is to follow Portugal’s lead and decriminalize all drug use while maintaining the illegality of drug trafficking. – _Gary S. Becker and Kevin M. Murphy (2013) In the late 1980s and 1990s a growing population of intravenous heroin users became a major threat to public health in Portugal, where rates of heroin users were among the highest in Europe. In the mid’90s Portugal engaged in an intensive debate on alternative enforcement policies to deal with drug use and, in 1998, a panel of leading scholars and medical professionals presented a report with recommendations rooted in understanding drug dependency as a disease rather than a crime.

Portugal: a paradox in productivity

December 22, 2017

Portugal is less productive than advanced economies. Paradoxically, the recent improvement in areas such as human capital, investment in innovation and R&D or a more friendly business environment has yet to lead to convergence in productivity levels. The Portuguese labour productivity as a percentage of G7 countries peaked in 1993 at 63.4%, decreasing since then to 58.4%. A similar trend is observed for productivity as a percentage of the average of EU core countries (from 60.

Spillovers of investment in PPPs onto Portuguese public and private investment and GDP

November 17, 2017

This paper presents results of time series techniques assessing the macroeconomic impact of investment in public-private partnerships (PPPs) on public and private investment in Portugal, using data for the period 1998-2013. The approach used allows the computation of crowding-in/crowding-out effects of investment from PPPs, that is, whether investment in PPPs provides favorable spillovers for the undertaking of private and public investment or otherwise is detrimental to its development. This area of research is particularly topical because this way of financing investment witnessed a surge in Portugal in the early 2000’s.

Entry and exit in the 2008–2013 Portuguese economic crisis

November 6, 2017

Recessions are conventionally considered as times in which low-productivity firms are driven out of the market at a relatively accelerated pace and resources freed to more productive uses as a result. But recessions that are closely associated with financial crises can reduce efficiency in resource reallocation through reduced bank lending to profitable projects. Banks may also forbear bad debtors, delaying the process of firm death in an effort to protect their own balance sheets, thereby hindering one of the key mechanisms through which productivity growth does its job.

Upward nominal wage rigidity: extensions to wage agreements

July 12, 2017

In Portugal, as in many other countries in continental Europe, the collective wage agreements between trade unions and employer associations are systematically extended to non-subscriber workers and employers. Since these agreements establish wage floors for most job titles, their frequent extension is equivalent to setting a wide range of compulsory minimum wages, which are regularly adjusted upward. In some firms these extensions can result in a wage structure that may not be appropriate, causing fewer hirings or added dismissals.

Boom, slump, sudden stops, recovery, and policy options: Portugal and the Euro

June 29, 2017

Over the past 20 years, Portugal has gone through a boom, a slump, a sudden stop, and now a timid recovery. Unemployment has decreased, but remains high, and output is still far below potential. Competitiveness has improved, but more is needed to keep the current account in check as the economy recovers. Private and public debt are high, both legacies of the boom, the slump and the sudden stop. Productivity growth remains low.

Earnings management dynamics in Portuguese listed firms

June 23, 2017

There are several incentives to engage in earnings management, which managers need to consider. Likewise, there are different ways to drive earnings and cash flows in a certain direction. Given the complex context in which firms operate, earnings management may be seen has a continuous and iterative process characterized by a mixture of incentives and practices. This research studies earnings management in Portuguese listed firms. The paper addresses two main strategies, namely real management and accrual management.

Call for Papers: Economic Policy in Portugal: Competition, Innovation, and Competitiveness and Internationalisation

March 29, 2017

The Portuguese Economic Journal is launching a call for papers for a special issue on** Economic Policy in Portugal: Competition, Innovation, and Competitiveness and Internationalisation.** Submissions are welcome from 16 to 30 September 2017. Papers accepted for publication will be awarded a Eur. 3,000 prize sponsored by Gabinete de Estratégia e Estudos of the Portuguese Ministry of Economy. You can find more information on the call for papers on the official website.

The impact of collective labor bargaining extensions

November 20, 2016

The recent crises raised a number of questions about the role of structural reforms in promoting economic growth. One area that has received greater attention is collective bargaining: the interactions between firms and employees in setting of pay and many other working conditions can be highly relevant promoting micro and macro flexibility, increasing resilience during a crisis and growth during the recovery. This paper studies the causal impact of collective bargaining on the labor market.

Maximum duration of fixed-term labor contracts in recessions

November 20, 2016

Policy makers and academics put great effort in understanding and minimising the negative employment effects of business cycles. This paper evaluates one policy option in this regard: greater flexibility in the maximum duration of fixed term contracts during recessions. Its simple rationale is that, when faced with an uncertain outlook (and restrictive permanent contracts), firms may be more likely to dismiss fixed-term contracts if the only legal alternative is to convert them.

From convergence to divergence: Portuguese demography and economic growth, 1500-1850

November 8, 2016

When did Portugal’s economy diverge from the European core? This paper constructs the first time-series for Portugal’s per capita GDP for 1500-1850, drawing on a new and extensive database. Starting around 1550 there was a highly persistent upward trend on per capita income, which accelerated after 1700 and peaked 50 years later. At that point, per capita incomes were high by European standards. Portuguese per capita GDP was about as high as that of Britain, Italy and the Netherlands, and higher than that of France, Spain, Germany and Sweden.

Demand, supply and markup fluctuations

October 24, 2016

Does monopoly power (i.e. markups) increase or decrease in recessions? If market power increases in recessions, production becomes more inefficient aggravating the recession. However, if market power decreases, competition works as a self-correcting mechanism in the economy increasing overall efficiency. For this reason, understanding how markups fluctuate has been so central in the debate about macroeconomic policy effectiveness. This debate is far from being solved. Its answer is empirical. However, there are two empirical challenges to determining the type of cyclical behavior of markups: (i) separating supply (productivity) shocks from demand shocks and (ii) properly measuring the markups.

The effects of cultural heritage on residential property values: evidence from Lisbon, Portugal

July 30, 2016

Historic cities are identifiable through their iconic monuments and buildings. Location relative to these structures generate premiums in the housing market. We examine the impact of such historic amenities on housing prices in Lisbon, Portugal. Results reveal heterogeneous impacts from different types of monuments. Churches, palaces and stone architecture have their own unique impact on the market and landmarks generate the highest premiums. Residents value living in proximity to a non-landmark church (yielding a premium of 4.

Portuguese external imbalances: driven by demand rather than price competitiveness

July 25, 2016

Large current account deficits in European economies, among them Portugal, have been a decisive feature of the European banking and sovereign debt crisis. While the Portuguese current account has undergone a severe adjustment, the level of external debt remains among the highest in Europe and reducing it down to the threshold defined by the EU-Commission’s Macroeconomic Imbalance Procedure is likely to take decades. Research relates the external imbalances occurring in the run-up to the crisis to a number of factors.

The Portuguese interbank money market during the subprime crisis and sovereign debt crisis

July 14, 2016

Money markets were severely impaired by the financial crisis and subsequent sovereign debt crisis. During the summer of 2007, BNP Paribas suspended redemptions for three investment funds due to the uncertainty regarding structured products. This event triggered the first stage of the financial crises in the euro area and linked it to the subprime mortgage crisis in the US. Afterwards, interbank lending was disturbed and the sovereign debt crisis aggravated the problem as country risk became a significant part of bank risk.

Sorry, we’re closed: loan conditions when bank branches close and firms transfer to another bank

April 23, 2016

Using a dataset with information on new loans granted in Portugal, we find that when firms switch to a new bank they are able to obtain lower interest rates. This result is in line with previous findings in the literature. However, the existing literature fails to explain which of two competing explanations drive these results. On one hand, banks may offer lower rates to compensate firms for the costs they face when switching.

Productivity and organization in Portuguese firms

April 6, 2016

Firms are extremely heterogeneous in their ability to transform a combination of inputs, like capital and labor, into the goods they decide to produce. One can point to many potential sources of heterogeneity and changes in productivity. Some of these sources are exogenous to a firm’s actions and can be most simply modeled as idiosyncratic (like random innovations or production disruptions). Some others are the organizational responses to changes in demand and consumer tastes, factor prices, and other changes in the economic environment, like trade liberalizations and tax reforms.

Renegotiation of Public-Private Partnerships

March 22, 2016

Over the last decades, Public-Private Partnerships (PPPs) have become a popular means for governments to build and maintain large infrastructure and public services. Portugal has used PPPs intensively (by 2011, it was the European country with the highest investment in PPPs as a % of GDP), mainly for highways. This paper raises the issue of why PPPs are so frequently renegotiated, and what effect those renegotiations have on PPP efficiency. We analyse who – the public or private party – initiates the renegotiation of the PPP contract and which reasons for renegotiations are most common.