Viewing 28 posts categorized under Productivity

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.

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.

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.

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.

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).

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.

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.

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.

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.

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.

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.