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The Impact of Urban Enterprise Zones on Establishments' Location Decisions: Evidence from French ZFUs

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Author Info

  • Thierry MAYER

    ()
    (Sciences-Po, CEPII, CEPR)

  • Florian MAYNERIS

    ()
    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE))

  • Loriane PY

    ()
    (Banque de France)

Abstract

In this paper, we study the impact of a French enterprise zones program the "Zones Franches Urbaines" (ZFUs) policy on establishments' location decisions. Our empirical analysis is based on a micro-geographic dataset which provides exhaustive information on the location of establishments in France over the period 2000-2007 at the census block level. We use a difference in difference approach combining spatial and time differencing. We also do triple difference estimations, using the fact that targeted urban areas have been selected in different waves over time. Finally, we exploit a discontinuity in the eligibility criteria of the policy as an exogenous source of variation to estimate the impact of the treatment. Our results show that the French ZFU policy has a positive and sizable impact on location choices. However, we also find that the policy mostly generates displacement effects, in particular through relocation of firms from the un-treated to the treated part within municipalities. Finally, the impact is shown to be highly heterogeneous across zones, firms and industries. The overall cost of moving establishments within municipalities is relatively high.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2012019.

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Length: 46
Date of creation: 28 Sep 2012
Date of revision:
Handle: RePEc:ctl:louvir:2012019

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Keywords: firm location; enterprise zones; spatial differencing;

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References

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  1. Laurent Gobillon & Thierry Magnac & Harris Selod, 2010. "Do Unemployed Workers Benefit from Enterprise Zones ? The French Experience," Working Papers, Centre de Recherche en Economie et Statistique 2010-45, Centre de Recherche en Economie et Statistique.
  2. Chiara Criscuolo & Ralf Martin & Henry Overman & John Van Reenen, 2012. "The Causal Effects of an Industrial Policy," NBER Working Papers 17842, National Bureau of Economic Research, Inc.
  3. Crozet, M. & Mayer, T. & Micchielli, J.L., 2000. "How Do Firms Agglomerate? A Study of FDI in France?," Papiers d'Economie Mathématique et Applications, Université Panthéon-Sorbonne (Paris 1) 2000.50, Université Panthéon-Sorbonne (Paris 1).
  4. Richard Baldwin & Toshihiro Okubo, 2009. "Tax reform, delocation and heterogeneous firms," NBER Working Papers 15109, National Bureau of Economic Research, Inc.
  5. Briant, Anthony & Lafourcade, Miren & Schmutz, Benoît, 2013. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," CEPREMAP Working Papers (Docweb) 1316, CEPREMAP.
  6. 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, Elsevier, vol. 43(1), pages 151-163.
  7. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 6(3), pages 323-346, June.
  8. Bondonio, Daniele & Engberg, John, 2000. "Enterprise zones and local employment: evidence from the states' programs," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 30(5), pages 519-549, September.
  9. Matias Busso & Jesse Gregory & Patrick Kline, 2011. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," Working Papers 11-07, Center for Economic Studies, U.S. Census Bureau.
  10. Henry Overman & Elias Einio, 2012. "The Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI," ERSA conference papers ersa12p164, European Regional Science Association.
  11. Daniele Bondonio, 2003. "Do Tax Incentives Affect Local Economic Growth? What Mean Impacts Miss in the Analysis of Enterprise Zone Policies," Working Papers 03-17, Center for Economic Studies, U.S. Census Bureau.
  12. Roland Rathelot & Patrick Sillard, 2008. "The Importance of Local Corporate Taxes in Business Location Decisions: Evidence From French Micro Data," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 118(527), pages 499-514, 03.
  13. Boarnet, Marlon G. & Bogart, William T., 1996. "Enterprise Zones and Employment: Evidence from New Jersey," Journal of Urban Economics, Elsevier, vol. 40(2), pages 198-215, September.
  14. Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2007. "Firm location decisions, regional grants and agglomeration externalities," Journal of Public Economics, Elsevier, Elsevier, vol. 91(3-4), pages 413-435, April.
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Cited by:
  1. Chabé-Ferret, Sylvain, 2012. "Matching vs Differencing when Estimating Treatment Effects with Panel Data: the Example of the Effect of Job Training Programs on Earnings," LERNA Working Papers, LERNA, University of Toulouse 12.24.381, LERNA, University of Toulouse.
  2. Criscuolo, Chiara & Martin, Ralf & Overman, Henry G & Van Reenen, John, 2012. "The causal effects of an industrial policy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8818, C.E.P.R. Discussion Papers.
  3. Mayneris, F. & Py, L., 2014. "The efficiency of enterprise zone programs: some conflicting results?," Working papers, Banque de France 474, Banque de France.
  4. Stephen J. Redding & Matthew A. Turner, 2014. "Transportation Costs and the Spatial Organization of Economic Activity," CEP Discussion Papers dp1277, Centre for Economic Performance, LSE.
  5. repec:hal:wpaper:halshs-00695225 is not listed on IDEAS
  6. Kristian Behrens, 2013. "Strength in Numbers? The Weak Effect of Manufacturing Clusters on Canadian Productivity," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 377, April.
  7. Briant, Anthony & Lafourcade, Miren & Schmutz, Benoît, 2013. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," CEPREMAP Working Papers (Docweb) 1316, CEPREMAP.
  8. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.
  9. R. Alison Felix & James R. Hines, Jr., 2011. "Who offers tax-based business development incentives?," Research Working Paper, Federal Reserve Bank of Kansas City RWP 11-05, Federal Reserve Bank of Kansas City.

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