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

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Author Info

  • Anthony Briant

    (SG-CIV - Secrétariat Général du Comité Interministériel des Villes - Ministère de la ville)

  • Miren Lafourcade

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), ADIS - Analyse des Dynamiques Industrielles et Sociales - Département d'Economie - Université Paris XI - Paris Sud)

  • Benoît Schmutz

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, ADIS - Analyse des Dynamiques Industrielles et Sociales - Département d'Economie - Université Paris XI - Paris Sud, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

Abstract

This paper providesempirical support to the intuitive statement that urban geography matters to the success or failure of place-based public policies, using the French enterprise zone program as a case study. According to the few existing evaluations, this program has only had a small positive average impact on firm and job creation rates. In addition, this impact was shown to be strongly heterogeneous across the treated neighborhoods may account for part of these results. We estimate a series of augmented difference-in-differences models in which we interact the treatment indicator with a series of original indicators of spatial isolation, wich account for severance, peripherality and disconnection to transportation networks within the urban area. Results indicate that isolation does matter to explain spatial differentials in job creation and firm settlement rates across enterprise zones: only accessible neighborhoods were able to draw benefits from tax breaks and social exemptions. moreover, whereas the program mostly worked through a displacement effect on pre-existing firms, we show that urban geography was a clear determinant of the decision to create new firms from scratch.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00695225.

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Date of creation: May 2012
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Handle: RePEc:hal:psewpa:halshs-00695225

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Keywords: Enterprise Zones ; Spatial Isolation ; Transportation Accessibility ; Urban Severance;

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References

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  1. Pauline Givord & Roland Rathelot & Patrick Sillard, 2011. "Place-based Tax Exemptions and Displacement Effects : An Evaluation of the Zones Franches Urbaines Program," Working Papers, Centre de Recherche en Economie et Statistique 2011-19, Centre de Recherche en Economie et Statistique.
  2. Jed Kolko & David Neumark, 2009. "Do Some Enterprise Zones Create Jobs?," NBER Working Papers 15206, National Bureau of Economic Research, Inc.
  3. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 48(2), pages 424-55, June.
  4. Ham, John C. & Swenson, Charles & Imrohoroglu, Ayse & Song, Heonjae, 2011. "Government programs can improve local labor markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community," Journal of Public Economics, Elsevier, Elsevier, vol. 95(7-8), pages 779-797, August.
  5. Mayer,T. & Mayneris, F. & Py, L., 2013. "The impact of Urban Enterprise Zones on establishment location decisions: Evidence from French ZFUs," Working papers, Banque de France 458, Banque de France.
  6. Matthew Freedman, 2013. "Targeted Business Incentives and Local Labor Markets," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 311-344.
  7. Patrick Kline & Enrico Moretti, 2013. "Place Based Policies with Unemployment," NBER Working Papers 18758, National Bureau of Economic Research, Inc.
  8. Matias Busso & Jesse Gregory & Patrick M. Kline, 2010. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," NBER Working Papers 16096, National Bureau of Economic Research, Inc.
  9. Patrick Sillard & Roland Rathelot, 2008. "Zones Franches Urbaines : quels effets sur l'emploi salarié et les créations d'établissements ?," Économie et Statistique, Programme National Persée, Programme National Persée, vol. 415(1), pages 81-96.
  10. Landers, Jim, 2006. "Why Don't Enterprise Zones Work? Estimates of the Extent that EZ Benefits are Capitalized into Property Values," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, Mid-Continent Regional Science Association, vol. 36(1).
  11. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2012. "Do Unemployed Workers Benefit from Enterprise Zones? The French Experience," IZA Discussion Papers 6357, Institute for the Study of Labor (IZA).
  12. Patrick Kline, 2010. "Place Based Policies, Heterogeneity, and Agglomeration," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 383-87, May.
  13. Freedman, Matthew, 2012. "Teaching new markets old tricks: The effects of subsidized investment on low-income neighborhoods," Journal of Public Economics, Elsevier, Elsevier, vol. 96(11), pages 1000-1014.
  14. 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.
  15. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, Elsevier, vol. 101(C), pages 133-147.
  16. David Neumark & Jed Kolko, 2008. "Do Enterprise Zones Create Jobs? Evidence from California's Enterprise Zone Program," NBER Working Papers 14530, National Bureau of Economic Research, Inc.
  17. Eleonora Patacchini & Yves Zenou, 2007. "Spatial dependence in local unemployment rates," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 7(2), pages 169-191, March.
  18. Ham, John C. & Swenson, Charles & İmrohoroğlu, Ayşe & Song, Heonjae, 2011. "Government programs can improve local labor markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community," Journal of Public Economics, Elsevier, Elsevier, vol. 95(7), pages 779-797.
  19. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
  20. Bondonio, Daniele & Greenbaum, Robert T., 2007. "Do local tax incentives affect economic growth? What mean impacts miss in the analysis of enterprise zone policies," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 37(1), pages 121-136, January.
  21. Briant, Anthony & Lafourcade, Miren & Schmutz, Benoît, 2013. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," CEPREMAP Working Papers (Docweb), CEPREMAP 1316, CEPREMAP.
  22. P. Givord & S. Quantin & C. Trevien, 2012. "A Long-Term Evaluation of the First Generation of the French Urban Enterprise Zones," Documents de Travail de la DESE - Working Papers of the DESE, Institut National de la Statistique et des Etudes Economiques, DESE g2012-01, Institut National de la Statistique et des Etudes Economiques, DESE.
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Citations

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Cited by:
  1. Kline, Patrick & Moretti, Enrico, 2013. "People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9741, C.E.P.R. Discussion Papers.
  2. Florian MAYNERIS & Loriane PY, 2013. "The efficiency of enterprise zone programs Some conflicting results?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2013025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Luc Behaghel & Adrien Lorenceau & Simon Quantin, 2012. "Tax exemptions and rural development: Evidence from a quasi-experiment," PSE Working Papers, HAL halshs-00728195, HAL.
  4. Behaghel, Luc & Lorenceau, Adrien & Quantin, Simon, 2013. "Replacing churches and mason lodges? Tax exemptions and rural development," CEPREMAP Working Papers (Docweb), CEPREMAP 1308, CEPREMAP.
  5. Mayer, Thierry & Mayneris, Florian & Py, Loriane, 2012. "The Impact of Urban Enterprise Zones on Establishments' Location Decisions: Evidence from French ZFUs," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9074, C.E.P.R. Discussion Papers.
  6. repec:hal:wpaper:halshs-00728195 is not listed on IDEAS
  7. Anthony Briant & Miren Lafourcade & Benoît Schmutz, 2012. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," PSE Working Papers, HAL halshs-00695225, HAL.
  8. P. Givord & R. Rathelot & P. Sillard, 2011. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Documents de Travail de la DESE - Working Papers of the DESE, Institut National de la Statistique et des Etudes Economiques, DESE g2011-13, Institut National de la Statistique et des Etudes Economiques, DESE.
  9. Philippe Askenazy & Christine Erhel, 2012. "The French Labour Market and the (Not So) Great Recession," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 10(2), pages 08-13, 08.
  10. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.
  11. Kristian Behrens, 2013. "Strength in Numbers? The Weak Effect of Manufacturing Clusters on Canadian Productivity," C.D. Howe Institute Commentary, C.D. Howe Institute, C.D. Howe Institute, issue 377, April.

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