Enterprise Zone Programs Research Articles

Should I Stay or Should I Go? Why Participants Leave Collaborative Governance Arrangements

AbstractWhat drives collaborating participants to leave collaborative arrangements? Collaboration is a dynamic and emergent process rather than a static condition. Previous studies focus on collaboration’s emergence and performance; few empirical studies examine why participants stop collaborating. We address this question by studying how the history and structure of the Illinois enterprise zone program relate to local governments’ renewing enterprise zone arrangements. We formulate hypotheses and provide empirical analysis at both the collaboration and individual participant levels to understand what relates to dropout. Using probit models, we provide evidence that participants of collaboration are less likely to drop out if the previous performance has been high when controlling for observable factors. Collaboration’s resource balance, stability, and participant similarity also relate to a lower likelihood of a participant’s dropping out of a collaboration. These findings shed light on the development of collaborative governance life cycle, particularly relating to later stages of collaboration.

Heterogeneous Effects of State Enterprise Zone Programs in the Shorter Run and Longer Run

The authors take up two questions that have not been explored in research on enterprise zones. First, does a considerably longer-run perspective on the effects of state enterprise zones lead to different answers? And second, are there heterogeneous effects of enterprise zones that depend on the set of incentives these programs offer, which can vary widely? The results indicate that whether state enterprise zone programs were observed through a longer-term lens, or through the lens of program heterogeneity, the authors generally did not find any consistent indication of beneficial effects of state enterprise zone programs; if anything, the longer-run effects are negative. The lack of positive effects is consistent with most of the prior evidence that focuses on effects that are short term and homogeneous.

Do Research Methods Matter in Enterprise Zone Outcome Evaluations?

Zhang (2015) and Lambert and Coomes (2001) have studied the Louisville Enterprise Zone (EZ) program and drawn different conclusions. This Forum/Letter to the Editor unpacks the differences in both studies by first exploring the structure and implementation of a state EZ program and various factors affecting EZ outcome measures. Methodologically, it is crucial to control for these factors to avoid biases in assessing the effectiveness of a program. Further exploration of conventional methods in the existing literature suggests that econometric analyses can offer remedies to control for these factors.

Heterogeneous Effects of State Enterprise Zone Programs in the Shorter Run and Longer Run

Heterogeneous Effects of State Enterprise Zone Programs in the Shorter Run and Longer Run

Rethinking U.S. enterprise zones: The role of research design in program evaluation

This paper offers an up-to-date review of Enterprise Zone programs across states in the U.S. An Enterprise Zone program often focuses on target locations, populations, and/or industries. Enterprise Zone program designs and implementations vary between states. The expected outcomes are likely to differ from the desired outcome, which is to revitalize Enterprise Zone areas. This paper also provides a review of the existing Enterprise Zone empirical literature on program effectiveness assessments. There are conflicting recommendations, even for the same Enterprise Zone program. To assess whether research design contributes to this situation, the paper explores several research design factors, including outcome measure, time span, spatial unit, data choice, and control of endogeneity. Information on these research factors in the existing literature is collected and coded. Descriptive and correlation analyses suggest that outcome measure, spatial unit, post-program time span, and the choice of an endogeneity control method have significant impacts on program effectiveness assessments.

Do Enterprise Zones Help Residents? Evidence from France

Enterprise zones are place-based policies whose purpose is to help people who live in deprived neighborhoods. They can affect equilibria on both the labor and housing markets. Using the French case, the paper proposes results on the impact of enterprise zone programs for residents, focusing on displacement and social composition effects that have not been much studied. The paper first shows that the unemployment rate of French EZ residents has decreased significantly as a result of the program and that it is due, in part, to the fact that some exemptions were made conditional on local hiring. In the long run, some composition effects occurred in the targeted areas and the decrease of unemployment was partly due to an increase in the share of high-skilled residents.

Targeted business incentives and the debt behavior of households

The empirical effects of place-based tax incentive schemes designed to aid low-income communities are unclear. While a growing number of studies find beneficial effects on employment, there is little investigation into other behaviors of households affected by such programs. We analyze the impact of the Texas Enterprise Zone Program on household debt and delinquency. Specifically, we utilize detailed information on all household liabilities, delinquencies, and credit scores from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, a quarterly longitudinal 5% random sample of all individuals in the USA with a social security number and a credit report. We identify the causal effect of the program by using a sharp regression discontinuity approach that exploits the known institutional rules of the program. We find a modest positive impact on the repayment of retail loans, but also evidence of an increase in the delinquency rates of auto loans and in Chapter 13 bankruptcy filings.

Capitalizing on Neighborhood Enterprise Zones: Are Detroit residents paying for the NEZ Homestead exemption?

In this paper we examine the degree to which the tax benefits of the Neighborhood Enterprise Zone Homestead (NEZH) program are capitalized into the value of residential property. Although Enterprise Zone (EZ) programs and the studies examining these place-based policies are abundant, the NEZH program is unique because it offers tax abatements directly to the homeowner. Specifically, NEZH beneficiaries receive an 11.5mill reduction (out of 66.61 total mills) for 12 years (excluding the value of land), and a phase-in to full taxation through year 15. We use residential sales data for properties sold in Detroit between 1997 and 2010 and a difference-in-differences model to estimate how much households are paying for the tax savings. Our primary results (intent-to-treat estimates) show all sales within NEZHs were 6–10% higher compared to those outside a zone. Furthermore, treatment-on-the-treated estimates highlight program beneficiaries paid 39% more for their property. With a full capitalization rate of 8.05%, these results indicate NEZH benefits are being overcapitalized by Detroit residents.

Targeted Business Incentives and the Debt Behavior of Households

The empirical effects of place-based tax incentive schemes designed to aid low-income communities are unclear. While a growing number of studies find beneficial effects on employment, there is little investigation into other behaviors of households affected by such programs. We analyze the impact of the Texas Enterprise Zone Program on household debt and delinquency. Specifically, we utilize detailed information on all household liabilities, delinquencies, and credit scores from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, a quarterly longitudinal 5% random sample of all individuals in the US with a social security number and a credit report. We identify the causal effect of the program by using a sharp regression discontinuity approach that exploits the known institutional rules of the program. We find a modest positive impact on the repayment of retail loans, and the evidence of an increase in the delinquency rates of auto loans, as well as in Chapter 13 bankruptcy filings.

Targeted Business Incentives and the Debt Behavior of Households

The empirical effects of place-based tax incentive schemes designed to aid low-income communities are unclear. While a growing number of studies find beneficial effects on employment, there is little investigation into other behaviors of households affected by such programs. We analyze the impact of the Texas Enterprise Zone Program on household debt and delinquency. Specifically, we utilize detailed information on all household liabilities, delinquencies, and credit scores from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, a quarterly longitudinal 5% random sample of all individuals in the US with a social security number and a credit report. We identify the causal effect of the program by using a sharp regression discontinuity approach that exploits the known institutional rules of the program. We find a modest positive impact on the repayment of retail loans, and the evidence of an increase in the delinquency rates of auto loans, as well as in Chapter 13 bankruptcy filings.

The impact of Urban Enterprise Zones on establishment location decisions and labor market outcomes: evidence from France

In this article, we study the impact of a French enterprise zone program—the ‘Zones Franches Urbaines’ (ZFUs) policy—on establishment location decisions and on labor market outcomes. Our main identification strategy, which combines spatial and time differencing, shows that conditional on locating in a municipality that hosts a ZFU, the policy has a positive and sizable impact on the probability to locate in the ZFU part rather than in the non-ZFU part of municipalities. However, the impact is highly heterogeneous across zones, industries and firms. We also show that this positive effect is entirely due to within-municipality diversion effects. Regarding labor market outcomes, the policy has a positive effect on employment, especially for low-wage workers. As for wages, the effect is null for low-wage workers, and negative for high-wage ones.

Impacts of Enterprise Zone Policy on Industry Growth

This study evaluates the impacts of the Louisville Enterprise Zone (EZ) program on the growth of different industries, covering a 20-year (1980-2000) time span. The research compares the preprogram (1980-1990) and postprogram (1990-2000) growth. A shift-share analysis first compares the regional competitiveness of EZ and non-EZ areas in 1990 and 2000, and suggests that most industries in EZ areas have been gaining strength. Five regression equations are estimated to quantify the effects of the EZ program on different industries. An instrumental variable approach is developed to deal with the possible issue of endogeneity during the EZ designation process. Results suggest that the Louisville EZ program has significantly increased the growth of manufacturing and service activities, and the program achieved its expected goals in the long run.

Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience

This paper shows that urban geography matters to the effectiveness of place-based policies, using the French enterprise zone program as a case study. Whereas this program created more jobs in spatially integrated neighborhoods, its impact on local wages was only visible in the more isolated ones. In addition, a focus on the average impact of the program would lead to the conclusion that it mostly succeeded in displacing preexisting firms, but a lower level of spatial isolation was a clear determinant of the decision to create new firms from scratch. (JEL H25, H32, L52, R32, R38)

Economic Transition in the City of Paterson, New Jersey (America’s First Planned Industrial City): Causes, Impacts, and Urban Policy Implications

This paper examines the dynamics of economic change in the City of Paterson, New Jersey, from the time of its founding in the late eighteenth century to 1990, with emphasis on the post-1945 era. Analysis shows that from the time of its founding to the first half of the twentieth century, Paterson experienced a period of economic growth followed by economic decline in the 1960s, characterized by major changes in its principal industries of cotton, locomotives, and silk. Economic growth in Paterson up to the early part of the twentieth century is attributable to several locational factors, including the availability of water resources, transportation, labor supply, and markets. Its decline in the post-1945 era is attributable to a combination of local, national, and global economic factors including periods of depression, labor discord, product substitution, decentralization of economic activities, and deindustrialization. Economic decline resulted in a high rate of unemployment, poverty, and urban decay. The most significant effort to reverse urban decline in the city is the urban enterprise zone (UEZ) program. The impacts of this program on economic growth in the city, however, remain inconclusive.

The Efficiency of Enterprise Zone Programs: Some Conflicting Results?

We propose in this paper a critical review of the literature on urban enterprise zones. The results that emerge from the papers published over the last twenty years vary a lot across studies. Several explanations can account for these apparently conflicting results. Technical tools and empirical methods for the evaluation of such policies have greatly improved since the 1990’s. Moreover, it seems that the efficiency of urban enterprise zones depends on zone characteristics, industrial sector and policy design. Further research in this area should try to better take into account general equilibrium effects, in order to provide a more accurate measure of the welfare implications of these policies.

Enterprise Zone Effectiveness In California

This case study looks at enterprise zones in California. Like most states, California had established an enterprise zone (EZ) program that offered businesses tax credits to encourage investment in depressed local economies. Yet despite nationwide adoption of enterprise zones, their efficacy as an economic development tool was disputed. In California, critics charged that costs had exploded without generating commensurate job growth and that EZs were a form of corporate welfare for large corporations that were the main recipients of tax credits. Obtaining reliable information about the benefits for local economies was difficult. The case explores this challenge in reporting results of a small study conducted by a local Southern California enterprise zone in the wake of calls by the state to eliminate the EZ program to help close a $25 billion budget deficit. The case also illustrates the role enterprise zones may play in “incentive packages” offered by local governments seeking to attract national and multinational companies.

Do unemployed workers benefit from enterprise zones? The French experience

This paper presents an impact evaluation of the French enterprise zone program which was initiated in 1997 to help unemployed workers find employment by granting a significant wage-tax exemption (about one third of total labor costs) to firms hiring at least 20% of their labor force locally. Drawing from a unique geo-referenced dataset of unemployment spells in the Paris region over an extensive period of time (1993–2003), we are able to measure the direct effect of the program on unemployment duration, distinguishing between short- and medium-term effects. This is done by implementing an original two-stage empirical strategy using individual data in the first stage and aggregate data and conditional linear matching techniques in the second stage. We show that although the enterprise zone program tended to “pick winners”, it is likely to be cost-ineffective. It had a small but significant effect on the rate at which unemployed workers find a job (which is increased by a modest 3%). This effect is localized and significant only in the short run (i.e. at best during the 3years that follow the start of the policy).

Do Unemployed Workers Benefit from Enterprise Zones? The French Experience

This paper is a statistical evaluation of the 1997 enterprise zone program in France. We investigate whether the program increased the pace at which unemployed workers residing in targeted municipalities and surrounding areas find employment. The work relies on a two-stage analysis of unemployment spells drawn from an exhaustive dataset over the 1993-2003 period in the Paris region. We first estimate a duration model stratified by municipalities in order to recover semester-specific municipality effects net of individual observed heterogeneity. These effects are estimated both before and after the implementation of the program, allowing us to construct variants of difference-in-difference estimators of the impact of the program at the municipality level. Following extensive robustness checks, we conclude that enterprise zones have a very small but significant effect on the rate at which unemployed workers find a job. The effect remains localized and is shown to be significant only in the short run.

Housing Policies in China: Issues and Options

This article consists of three parts. The first part deals with theory. We evaluate the pros and cons of government involvement in urban housing and of renting versus ownership. In the second part, we summarize the different housing policies that have been implemented in the United States, Europe and Asia. We draw some conclusions: In particular, we show that there is a tradeoff between encouraging home ownership and social housing since countries that have favored the former have neglected the latter (like Japan, Spain, etc.). In the third part, we use the theory and the international policy parts to address housing policy issues in China. One of the main concerns in Chinese cities is the raise of poverty mainly by “illegal” migrants (who are Chinese rural residents) living in “urban villages”. We propose two steps to fight against poverty in Chinese cities. The first one is to require that the Chinese government recognize these “illegal” migrants by helping them becoming “legal”. The second step is to encourage social housing that directly or indirectly subsidizes housing for the poor. In that case, to fight against poverty, one can either implement place-targeted policies (like the enterprise zone programs in the US and Europe and/or housing projects in the US, UK, or France) or people-targeted policies (like the MTO programs in the US). We also discuss other issues related to poverty. For example, we suggest that the government could try to keep migrants in rural areas by attracting firms there and/or introduce a microfinance system that helps them become entrepreneurs.

Incidence and Substitution in Enterprise Zone Programs: The Case of Colorado

Among 53,334 urban Colorado establishments, geographic information systems (GIS) techniques identify those that are and are not in enterprise zones (EZs). EZs have no effect on payroll per worker. Therefore, subsidy incidence is not on labor. Urban EZs do not increase employment per establishment, implying that subsidies induce net substitution effects for capital that counteract scale effects on labor. Rural EZs increase employment in the smallest of 13,278 establishments, implying that capital is less substitutable for labor with rural production functions and subsidy mixes. Employment effects differ across EZs. Equilibrium incidence of subsidies is probably on immobile factors such as commercial real estate.