Pedro Portugal

Life Duration of New Firms

The authors follow firms created in Portuguese manufacturing in 1983 and study the determinants of their lifetime. One fifth of them died during the first year of their lives and only 50 percent survived for four years. Duration and limited-dependent variable models are employed to ascertain the relative importance of industry- and firm-specific variables to in explaining the period between firm birth and its disappearance from economic activity. New firm failure varies negatively with firm start-up size, the number of plants operated by the firm, and the industry growth rate, and positively with the extent of entry in the industry. Copyright 1994 by Blackwell Publishing Ltd.

The survival of new plants: Start-up conditions and post-entry evolution

This paper examines the longevity of entrants. We find size to be an important determinant of the chances of survival, this being particularly relevant to de novo entrants as compared to entry by established firms. Current size is also found to be a better predictor of failure than initial size. Moreover, our findings indicate that, after controlling for size differences, past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period. Finally, new plants are more likely to live longer if they enter growing industries or industries with little entry activity.

Job Displacement, Relative Wage Changes, and Duration of Unemployment

Using special CPS data on displaced workers, this article investigates the wage consequences of job displacement in a framework that emphasizes the effects of past job duration(s) and unemployment duration(s) on postdisplacement wages. Our model also attempts to take account of the simultaneity between unemployment duration and the postdisplacement wage. It is found that duration strongly reduces subsequent earnings and that considerable overstatement of the loss in firm-specific training investments is implied by conventional routes to measuring wage losses.

Closure and Divestiture By Foreign Entrants: The Impact of Entry and Post-Entry Strategies

We analyze the longevity of foreign entrants explicitly considering two possible ways of exit: firm closure and capital divestiture. We find that entry and post-entry strategies affect the longevity of firms and of foreign equity holdings, but in different manners. While the ownership arrangements and organizational structure affect the likelihood of divestment, they exert no significant effect upon closure. The entry mode exerts opposite effects on the two modes of exit, greenfield entrants being more likely to shutdown, but less likely to be divested. Only human capital affects closure and divestment in the same manner. Firms with large endowments of human capital are less likely to exit, irrespective of the exit mode considered.

Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations

Changes in the legislation in the mid-80s in Portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages, as the minimum wage increased sharply for a very specific group of workers. Relying on a matched employer employee panel data set, we model gross worker flows - accessions and separations - in continuing firms, as well as in new firms and those going out of business, using a count regression model applied to proportions. Employment trends for teenagers, the affected group, are contrasted to those of older workers, before and after the raise in the youth minimum wage. The major effect on teenagers of a rising minimum wage is the reduction of separations from the employer, which compensates for the reduction of accessions to new and continuing firms. In this sense, our results can reconcile some of the previous evidence that has been presented in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow.

The effect of advance notification of plant closings on unemployment

Using data from the 1984 Displaced Worker Survey, the authors model the determinants of time without work following job displacement for a large sample of workers laid off because of plant shutdowns between 1979 and 1984. The major focus of the paper is on the role of advance notification in mitigating unemployment. The estimating procedure accommodates right censored observations stemming from continuing or open-ended spells of unemployment. Advance notification is found to have significantly reduced the duration of unemployment of those notified workers who did not draw unemployment insurance benefits and, in particular, of those who left the plant prior to termination. Advance notice had much less effect on the time without work of notified workers whose spell length of unemployment was long enough for them to collect unemployment insurance benefits.

Unemployment Duration: Competing and Defective Risks

This paper examines the determinants of unemployment duration in a competing risks framework with two destination states, namely, inactivity and employment. The major innovation is our recognition of defective risks. We first use a polynomial hazard function to test for the presence of two-sources of defective risks: search involving a random process of unlucky draws that yields a non-proper duration distribution; and a split-population model in which the decision by some individuals not to consider certain destination states produces a defective distribution. Having established the primacy of the latter model, we refine it using a more flexible piecewise-constant baseline hazard function. This specification broadly confirms our earlier findings but offers a more convincing explanation for positive and zero transition rates out of unemployment. Although we do not reject the null of proportionality, abandoning the proportionality assumption does not materially alter our conclusions.

Labour market outliers: Lessons from Portugal and Spain

Spain has the highest unemployment rate (22.2%) of any European Union country, Portugal one of the lowest (7.3%). Superficially, these countries share many labor market features: the toughest job security rules in the OECD, an apparently similar architecture of wage bargaining, and comparable generosity of their unemployment insurance systems, at least since 1989. We address the puzzle by examining Portuguese and Spanish labor market institutions, in particular job security, unemployment benefits and the system of wage bargaining. We then conduct empirical analysis of Spanish and Portuguese unemployment outflows and wage distributions, using micro data. We find differences in unemployment benefits (non-existent in Portugal until 1985, and less generous nowadays), differences in wage flexibility (wage floors by category established by collective agreements are set at a lower relative level in Portugal), and, in practice, higher firing costs in Spain. A key explanation of the difference in Portuguese and Spanish unemployment rates is the wage adjustment process. Generous benefit levels may have been necessary for the path Spanish unions took, but this was not the sole explanation of different wage setting in Spain and Portugal.

Employment Dynamics and the Structure of Labor Adjustment Costs

In this article we document the patterns of employment adjustment at the micro level. We find clear evidence of lumpy adjustment consistent with the presence of nonconvexities in the adjustment technology—inaction is pervasive, action spells are short‐lived, and extreme adjustment episodes are responsible for a nontrivial share of employment adjustment. We also find that the probability of employment adjustment increases with the duration of inaction. The skill structure of the workforce, the type of employment contract, and the proportion of low‐tenure workers, which we interpret as proxies for the magnitude of adjustment costs, all influence the probability of adjustment.

On the Distributional Shape of Unemployment Duration

Using an accelerated failure time model, the extended generalized gamma distribution is deployed to discriminate among various special cases of that distribution. Displaced worker data from the January 1984 Current Population Survey are analyzed within a regression framework that accommodates the stochastic nature of the point of censoring associated with incomplete spells of unemployment. Not only are the regression parameters sensitive to distributional assumption but also there is evidence of different distributional shapes and hence duration dependencies in subsets of the data.