Place‐based investment and neighborhood change: The impacts of New Markets Tax Credits on jobs, poverty, and neighborhood composition

We undertake the first study of the New Markets Tax Credit (NMTC) program that estimates the impacts of different types of projects on expected outcomes. We also explore an enhanced set of outcome measures that allows us to understand the mechanisms behind the impacts of the program and how it affects the composition of neighborhoods. To do so, we first create a typology of NMTC project types and then use a difference in differences approach to estimate the impact of NMTC projects on their expected outcomes, including firms, jobs, residents with jobs, median income, poverty rate, population, population with a bachelor's degree, and turnover rate. For each project that we expect would lead to an increase in the number of firms in a neighborhood, we find that an average of 18 new firms enter. Similarly, for projects with anticipated job and income effects, we find 101 new jobs in the community and 27 more residents in the neighborhood with jobs, along with modestly higher incomes and a decline in neighborhood poverty rate of 0.7%. However, we cannot determine whether there are economic gains for pre‐existing residents since we also find an increase in the number of adults with a college degree large enough to account for the increases in residents with jobs and wages and for much of the estimated decline in poverty. An event study analysis shows that for firms, pre‐existing trends might threaten a causal interpretation of the estimates, but these pre‐trends do not exist for new jobs in the community or residents in the neighborhood with jobs.