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Do Unemployed Workers Benefit from Enterprise Zones? The French Experience

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Author Info

  • Gobillon, Laurent

    ()
    (INED, France)

  • Magnac, Thierry

    ()
    (University of Toulouse I)

  • Selod, Harris

    ()
    (Institut National de la Recherche Agronomique)

Abstract

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 zones 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 percent). This effect is localized and significant only in the short run (i.e. at best during the 3 years that follow the start of the policy).

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6357.

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Length: 44 pages
Date of creation: Feb 2012
Date of revision:
Publication status: published in: Journal of Public Economics, 2012, 96 (9), 881 - 892
Handle: RePEc:iza:izadps:dp6357

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Keywords: enterprise zone; evaluation of programs; unemployment; regional policies;

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References

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  1. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers, University of Western Ontario, CIBC Centre for Human Capital and Productivity 20035, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  2. 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.
  3. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2010. "Do unemployed workers benefit from enterprise zones? The French experience," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 645, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Leslie E. Papke, 1991. "Tax Policy and Urban Development: Evidence From The Indiana Enterprise Zone Program," NBER Working Papers 3945, National Bureau of Economic Research, Inc.
  5. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2007. "The Effect of Location on Finding a Job in the Paris Region," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 433, Institut d'Économie Industrielle (IDEI), Toulouse, revised Mar 2009.
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  19. Cynthia L. Rogers & Jill L. Tao, 2004. "Quasi-Experimental Analysis of Targeted Economic Development Programs: Lessons from Florida," Economic Development Quarterly, , vol. 18(3), pages 269-285, August.
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  23. 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.
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