Financial Instability and Credit Constraint: Evidence from the Cost of Bank Financing

This paper examines the relation between the degree of firms’ financial constraint and the observed rise in the cost of bank financing during the global financial crisis of 2008. It introduces a new measure of financial constraint: the lending rate paid by each firm on working capital loans. In line with previous research, the findings point to a more severe contraction in credit supply for more credit constrained firms. Additionally, the results show that the existence of collateral and a large portfolio of lenders mitigate the credit supply contraction observed in that period.

Individual Teacher Incentives, Student Achievement and Grade Inflation

How do teacher incentives affect student achievement? We contribute to this question by examining the effects of the recent introduction of teacher performance-related pay and tournaments in Portugal's public schools. Specifically, we draw on matched student-school panel data covering the population of secondary school national exams over seven years. We then conduct a difference-in-differences analysis based on two complementary control groups: public schools in two autonomous regions that were exposed to lighter versions of the reform than in the rest of the country; and private schools, which are also subject to the same national exams but whose teachers were not affected by the reform. Our results consistently indicate that the increased focus on individual teacher performance caused a significant decline in student achievement, particularly in terms of national exams. The triple-difference results also document a significant increase in grade inflation.performance-related pay, public sector, matched school-student data

Individual Teacher Incentives, Student Achievement and Grade Inflation

How do teacher incentives affect student achievement? Here we examine the effects of the recent introduction of teacher performance-related pay and tournaments in Portugal's public schools. Specifically, we conduct a difference-in-differences analysis based on population matched student-school panel data and two complementary control groups: public schools in autonomous regions that were exposed to lighter versions of the reform; and private schools, which are subject to the same national exams but whose teachers were not affected by the reform. We find that the focus on individual teacher performance decreased student achievement, particularly in terms of national exams, and increased grade inflation.Tournaments, Public Sector, Matched School-Student Data

Paying More to Hire the Best? Foreign Firms, Wages and Worker Mobility

In the context of the debate on the labour-market consequences of globalisation, we examine worker mobility in order to identify the wage differences between foreign and domestic firms. Using matched employer-employee panel data for Portugal, we consider virtually all spells of interfirm mobility over a period of ten years. We find that foreign firms offer significantly more generous wage policies, although there is also a (smaller) selection effect. The results are robust to the consideration of wage growth differences, the case of displaced workers and different subsets of workers.Foreign Direct Investment, Worker Displacement, Wage Growth

Can Targeted, Non-Cognitive Skills Programs Improve Achievement? Evidence from EPIS

EPIS is an original and large private-sector program aimed at improving student achievement and eroding early school leaving at Portuguese state schools. The program first screens students to focus only on those more likely to perform poorly; and then conducts a number of small-group sessions aimed at improving the non-cognitive skills (e.g. study skills, motivation, self-esteem) of the selected students. Our quasi-experimental evidence of the effects of EPIS is drawn from rich longitudinal student data and the different timings in the roll-out of the program, both within and across schools. The results indicate that the program reduced grade retention by at least 10 percentage points and did so in a cost effective way.student achievement, program evaluation, matched school-student data

Worker Churning and Firms’ Wage Policies

If a random firm were to increase its wages, would that decrease the firm’s churning (“excessive” worker reallocation)? Although the trade-off between wage and churning costs has received attention in both the labour and HRM literatures, there seems to be no evidence about the causal impact of wages upon churning. This paper seeks to fill that gap by considering detailed Portuguese matched employer-employee panel data and different identification methods. After presenting comprehensive evidence about job and worker flows and churning, we find that even models based on within-firm time differences do still generate the negative association between wages and turnover found in most research. However, that result no longer holds when we consider instrumental variables based on minimum wages determined by collective bargaining arrangements. One possible interpretation of our finding is that workers’ effort may not be sufficiently sensitive to wages: employers may replace workers priced out of the labour market with more skilled individuals, so that churning does not fall.Worker Turnover, Endogeneity, Personnel Economics, Efficiency Wages

Dismissals for cause: The difference that just eight paragraphs can make

We present evidence about the effects of dismissals-for-cause requirements, a specific component of employment protection legislation that has received little attention. We study a quasi-natural experiment generated by a law introduced in Portugal: out of the 12 paragraphs in the law that dictated the costly procedure required for dismissals for cause, eight did not apply to small firms. Using matched employer-employee longitudinal data and difference-in-differences methods, we examine the impact of that differentiated change in firing costs upon several variables over a long period of time. In our results, we do not find robust evidence of effects on job or worker flows, although some estimates suggest a slight increase in hirings. On the other hand, firms that gain flexibility in their dismissals exhibit consistently slower wage growth and sizeable increases in their relative performance. Our findings suggest that reducing firing costs of the type studied here increase workers' effort and reduce their bargaining power.Employment protection legislation, worker flows, wages, firm performance