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What Do We Know about Enterprise Zones?

In: Tax Policy and the Economy, Volume 7


  • Leslie E. Papke


In the last decade, most states have targeted certain depressed areas for revitalization by providing a combination of labor and capital tax incentives to firms operating in an "enterprise zone" (EZ). A partial equilibrium model is used to analyze the theoretical effects of various EZ incentives on zone wages and employment. I review empirical evidence on the operational success of EZ programs in Britain and the U.S., and present new evidence from the 1990 Census on the success of the Indiana program. Most British zone businesses are relocations, with an annual cost per job of approximately $15,000. U.S. surveys find that much zone activity comes from expansions of existing businesses, with the average cost per zone job ranging from $4,564 to $13,000 annually (about $31,113 per zone resident job). How do zones perform relative to what would have been their performance in the absence of zone designation? Evidence on this issue is summarized for the state of Indiana, where the zone program appears to have increased inventory investment and reduced unemployment claims. But new evidence based on the 1990 Census of Population indicates that the economic well-being of zone residents in Indiana has not appreciably improved.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Leslie E. Papke, 1993. "What Do We Know about Enterprise Zones?," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 37-72 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:10877

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    References listed on IDEAS

    1. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
    2. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
    3. Michael Brintnall & Roy E. Green, 1988. "Comparing State Enterprise Zone Programs: Variations in Structure and Coverage," Economic Development Quarterly, , vol. 2(1), pages 50-68, February.
    4. N/A, 1985. "General Policy," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 74-79, January.
    5. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226036335, Summer.
    6. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "Introduction to "A General Equilibrium Model for Tax Policy Evaluation"," NBER Chapters,in: A General Equilibrium Model for Tax Policy Evaluation, pages 1-5 National Bureau of Economic Research, Inc.
    7. R A Erickson & S W Friedman, 1990. "Enterprise zones: 1. Investment and job creation of state government programs in the United States of America," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 8(3), pages 251-267, June.
    8. McLure, Charles E, Jr, 1970. "Taxation, Substitution, and Industrial Location," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 112-132, Jan.-Feb..
    9. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
    10. N/A, 1985. "General Policy," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 112-117, January.
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    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue


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