Working Paper
Do Toll-free Highways Foster Firm Formation and Employment Growth? Results from a Quasi-natural Experiment
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Labor Market
Innovation and Structural Change
Companies
The paper studies the impact of a switch from free to charged highway provision on firm numbers and private sector employment in a cross-section of Portuguese municipalities. It exploits the fact that highway tolls in Portugal were unexpectedly raised in reaction to the financial crisis to establish causality. Results from a difference-in-differences analysis indicate a significantly negative effect of highway tolls on number of firms and employment in treated municipalities vis-à-vis the control group. We also find negative effects of tolls in municipalities not directly traversed by the treated highways, with larger firms and manufacturing firms being most strongly affected.
