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How the Portuguese firms adjusted to the economic and financial crisis: main shocks and channels of adjustment
This article reports the findings of a survey conducted in 2014/2015 on a sample of Portuguese firms with the main purpose of identifying the major shocks faced by firms during the recent crisis and detecting their response in terms of wage-setting, price setting and labour force composition. Firms’ difficulties in being repaid by their customers and the decline of demand were reported as the two most important factors affecting firms negatively during the crisis. The impact of these two shocks was particularly felt in very small firms, in sectors such as construction, energy or trade and in firms that sell mostly to domestic markets. Reducing employment was the main instrument to accommodate negative shocks, in particular through the freeze or reduction of new hires, non-renewal of temporary contracts at expiration or individual dismissals. An increasing number of firms also froze the base wages of their workers and reduce their prices.