An Analysis of the Los Angeles Revitalization Zone: Are Place-Based Investment Strategies Effective Under Moderate Economic Conditions?

Abstract

This article examines the economic effect of the Los Angeles Revitalization Zone (LARZ) on private sector investments. The LARZ program was established after the 1992 Los Angeles riots and designed to rebuild the neighborhoods most affected by them. Unlike most place-based programs, the LARZ included significant clusters of business activity and was not made up of the poorest of the poor in Los Angeles. Like other place-based development efforts, the LARZ did not seem to generate significant benefits for the targeted neighborhoods. Using an ordinary least squared (OLS) model that controls for socioeconomic, economic, agglomeration, and riot intensity factors, we found that the LARZ program had a negative effect on all but the very lowest value building permits. The study suggests that place-based infrastructure and development programs may not be effective at stimulating investment, even where economic and socioeconomic barriers are not severe. Moreover, it points to a research gap in nonmarket factors that might help explain construction investment.