Place-Based Policies: A Path to Opportunity or a Mark of Stigma for Targeted Neighborhoods?

In France, place-based policies channel public subsidies to low-income urban zones labeled "priority" neighborhoods. Yet, such policies may backfire by stigmatizing the targeted areas. This paper exploits a quasi-experimental discontinuity created by a reform that redrew the subsidy map using a local poverty cutoff to evaluate impacts on school outcomes, population sorting across labeled and unlabeled neighborhoods, and urban segregation. Using a difference-in-differences design, we show that public middle schools in newly designated neighborhoods experienced a persistent decline in enrollment relative to schools in unlabeled areas just above the cutoff. This territorial stigma, driven by school avoidance across all socioeconomic groups, redirected pupils to public schools in unlabeled areas and, among wealthier families, to private schools. Policy designation also depressed housing prices and triggered reverse gentrification, while educational support proved insufficient to offset rising urban segregation. Crucially, the stigma persisted even after neighborhoods lost their subsidized status, leading to sustained declines in academic achievement due to both reputational damage and subsidy withdrawal.