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Using Enterprise Zones to Attract the Creative Class: Some Theoretical Issues

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  • Batabyal, Amitrajeet
  • Yoo, Seung Jick

Abstract

We study decision-making by a regional authority (RA) that uses enterprise zones to attract members of the creative class---referred to as entrepreneurs---to its region. The enterprise zones provide a local public good (LPG) L to entrepreneurs who become members. First, we compute the utility maximizing number of entrepreneurs N to attract and the optimal provision level of the LPG. Second, if the LPG L is chosen optimally, then, given N, we determine an expression for the utility of an entrepreneur. Third, we calculate how much an entrepreneur would be willing to pay to become a member of an enterprise zone and then discuss the potential existence of an efficient and revenue-neutral equilibrium. Finally, we comment on some theoretical difficulties stemming from the twin facts that the number of enterprise zones created and the number of entrepreneurs attracted to these zones have to be integers.

Suggested Citation

  • Batabyal, Amitrajeet & Yoo, Seung Jick, 2020. "Using Enterprise Zones to Attract the Creative Class: Some Theoretical Issues," MPRA Paper 105414, University Library of Munich, Germany, revised 07 Jan 2021.
    • Handle: RePEc:pra:mprapa:105414
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    References listed on IDEAS

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    1. Anthony Briant & Miren Lafourcade & Benoît Schmutz, 2015. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 88-124, May.
    2. Amitrajeet A. Batabyal & Karima Kourtit & Peter Nijkamp, 2019. "Using local public goods to attract and retain the creative class: A tale of two cities," Regional Science Policy & Practice, Wiley Blackwell, vol. 11(3), pages 571-581, August.
    3. Scotchmer, Suzanne, 1985. "Profit-maximizing clubs," Journal of Public Economics, Elsevier, vol. 27(1), pages 25-45, June.
    4. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, December.
    5. Zoltán J. Ács & Pontus Braunerhjelm & David B. Audretsch & Bo Carlsson, 2015. "The knowledge spillover theory of entrepreneurship," Chapters, in: Global Entrepreneurship, Institutions and Incentives, chapter 7, pages 129-144, Edward Elgar Publishing.
    6. Jed Kolko & David Neumark, 2010. "Do some enterprise zones create jobs?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(1), pages 5-38.
    7. David Audretsch & Maksim Belitski, 2013. "The missing pillar: the creativity theory of knowledge spillover entrepreneurship," Small Business Economics, Springer, vol. 41(4), pages 819-836, December.
    8. Batabyal, Amitrajeet, 2020. "Monopoly vs. Individual Welfare When a Local Public Good is Used to Attract the Creative Class," MPRA Paper 101465, University Library of Munich, Germany, revised 09 Jun 2020.
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    Cited by:

    1. Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2022. "Tax policy and interregional competition for mobile venture capital by the creative class," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).

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    More about this item

    Keywords

    Creative Class; Enterprise Zone; Entrepreneur; Local Public Good; Membership;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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