Viewing 21 posts categorized under Economic Growth

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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?

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.

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.

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.

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.

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.