DP17227 Nobody’s Gonna Slow Me Down? The Effects of a Transportation Cost Shock on Firm Performance and Behavior
This paper takes a deep and comprehensive look into the firm-level behavioral reactions to a massive
transportation cost shock. Exploiting rich data encompassing the universe of Portuguese private firms
and a natural experiment we find that the introduction of tolls on previously toll-free highways caused a
substantial decrease of turnover and firm profits. In response to the tolls, firms reduced expenses, cutting
employment-related expenses and purchases of other inputs in a similar magnitude. Labor costs were
reduced by employment cuts rather than by wage cuts. We find evidence for increased firm exit in treated
municipalities, but not for increased re-location.