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Government programs can improve local labor markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community

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  • Ham, John C.
  • Swenson, Charles
  • Imrohoroglu, Ayse
  • Song, Heonjae
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    Abstract

    Federal and state governments spend well over a billion dollars a year on programs that encourage employment development in disadvantaged labor markets through the use of subsidies and tax credits. In this paper we use an estimation approach that is valid under relatively weak assumptions to measure the impact of State Enterprise Zones (ENTZs), Federal Empowerment Zones (EMPZs), and Federal Enterprise Community (ENTC) programs on local labor markets. We find that all three programs have positive, statistically significant, impacts on local labor markets in terms of the unemployment rate, the poverty rate, the fraction with wage and salary income, and employment. Further, the effects of EMPZ and ENTC designation are considerably larger than the impact of ENTZ designation. We find that our estimates are robust to allowing for a regression to the mean effect. We also find that there are positive, but statistically insignificant, spillover effects to neighboring Census tracts of each of these programs. Thus our positive estimates of these program impacts do not simply represent a transfer from the nearest non-treated Census tract to the treated Census tract. Our results are noteworthy for several reasons. First, our study is the first to jointly look at these three programs, thus allowing policy makers to compare the impacts of these programs. Second, our paper, along with a concurrent study by Neumark and Kolko (2008), is the first to carry out the estimation accounting for overlap between the programs. Third, our estimation strategy is valid under weaker assumptions than those made in many previous studies; we consider three comparison groups and let the data determine the appropriate group. Fourth, in spite of our conservative estimation strategy, by looking at national effects with disaggregated data, we show that ENTZ designation generally has a positive effect on the local labor market, while most previous research on ENTZs, much of which used more geographically aggregated data to look at state-specific effects, did not find any significant impacts. Fifth, we note that there is little or no previous work on ENTCs. Overall, our results strongly support the efficacy of these labor market interventions.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 7-8 (August)
    Pages: 779-797

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    Handle: RePEc:eee:pubeco:v:95:y:2011:i:7-8:p:779-797

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: Enterprise zones Empowerment zones Enterprise communities Program evaluation Disadvantaged labor markets;

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    Cited by:
    1. Behaghel, Luc & Lorenceau, Adrien & Quantin, Simon, 2013. "Replacing churches and mason lodges? Tax exemptions and rural development," CEPREMAP Working Papers (Docweb) 1308, CEPREMAP.
    2. Accetturo, Antonio & de Blasio, Guido, 2012. "Policies for local development: An evaluation of Italy's “Patti Territoriali”," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 15-26.
    3. Givord, Pauline & Rathelot, Roland & Sillard, Patrick, 2013. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 151-163.
    4. Hanson, Andrew & Rohlin, Shawn, 2013. "Do spatially targeted redevelopment programs spillover?," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 86-100.
    5. Freedman, Matthew, 2012. "Teaching new markets old tricks: The effects of subsidized investment on low-income neighborhoods," Journal of Public Economics, Elsevier, vol. 96(11), pages 1000-1014.
    6. Cerqua, Augusto & Pellegrini, Guido, 2014. "Do subsidies to private capital boost firms' growth? A multiple regression discontinuity design approach," Journal of Public Economics, Elsevier, vol. 109(C), pages 114-126.
    7. Anthony Briant & Miren Lafourcade & Benoît Schmutz, 2012. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," PSE Working Papers halshs-00695225, HAL.
    8. Anthony Briant & Miren Lafourcade & Benoît Schmutz, 2012. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," Working Papers halshs-00695225, HAL.

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