This paper studies the effect of increased product market competition on executive compensation and incentives. We use a reform that simplified firm entry regulation in Portugal as a quasi-natural experiment, and exploit its staggered implementation across municipalities for identification. Using employer-employee data, we find that increased competition following the reform raised total pay but reduced the sensitivity of pay to firm performance. This is consistent with theoretical results showing that a fall in entry costs weakens managerial incentive provision. Entry deregulation also increased performanceinduced CEO turnover and firms' probability of exit, suggesting that competition provides direct incentives for managerial effort.

This paper examines Portuguese firms' survival over the business cycle and investigates whether the effect of firm size varies across the phases of the cycle and with the type of shock associated with the periods of economic contraction. Our results show that smaller firms are more likely to shut down than larger firms. Within each size band, however, we find that during the two crises micro firms experience hazards of closing (relative to large firms) at least similar to those observed in the pre-crisis period; while medium sized firms are found to be more vulnerable during the Financial Crisis period, but show more resilience during the Sovereign Debt Crisis. The results suggest that during the Sovereign Debt Crisis firms faced higher probability of closing than during the Financial Crisis.

This paper studies the e¤ect of …rm entry deregulation on the returns to skill and education. We exploit a comprehensive episode of entry deregulation, unique in the industrialized world, as a quasi-natural experiment. Using matched employer-employee data for the universe of workers and …rms in Portugal, we show that increased product market competition, which resulted from deregulation, increased the returns to a university degree and the returns to skill. We verify that our results are not driven by changes in employment composition, and are unlikely to be driven by skill-biased technical change, or by workers who change skill levels after the deregulation.