This paper assesses the impact of product market deregulation in upstream sectors on the productivity

growth of firms in downstream sectors (i.e. those firms using the output of the reformed sectors as inputs in

their production process). Relying on a firm level database for the period 2004-2014 covering all

Portuguese firms, we show that reforms bring productivity gains already in the short-run and that are

sustained in the long-run. The effects are more positive for those further away from the technological

frontier and are also heterogeneous across sectors. In addition, reforms potentiate the exit of the least

productive firms, improving the resource allocation in the economy by a process of selection – for the least

productive, only those that have scope to catch-up with the frontier are able to remain. Finally, we show

that the adoption of product market reforms in upstream sectors leads to a more resilient economy, better

equipped to face adverse shocks.