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The Impact of Urban Enterprise Zones on Establishments' Location Decisions: Evidence from French ZFUs

  • Mayer, Thierry
  • Mayneris, Florian
  • Py, Loriane

In this paper, we study the impact of a French enterprise zones program---the ``Zones Franches Urbaines'' (ZFUs) policy---on establishments' location decisions. Our empirical analysis is based on a micro-geographic dataset which provides exhaustive information on the location of establishments in France over the period 2000-2007 at the census block level. We use a difference in difference approach combining spatial and time differencing. We also do triple difference estimations, using the fact that targeted urban areas have been selected in different waves over time. Finally, we exploit a discontinuity in the eligibility criteria of the policy as an exogenous source of variation to estimate the impact of the treatment. Our results show that the French ZFU policy has a positive and sizable impact on location choices. However, we also find that the policy mostly generates displacement effects, in particular through relocation of firms from the un-treated to the treated part within municipalities. Finally, the impact is shown to be highly heterogeneous across zones, firms and industries. The overall cost of moving establishments within municipalities is relatively high.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9074.

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Date of creation: Aug 2012
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Handle: RePEc:cpr:ceprdp:9074
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  1. Chiara Criscuolo & Ralf Martin & Henry G. Overman & John Van Reenen, 2012. "The Causal Effects of an Industrial Policy," SERC Discussion Papers 0098, Spatial Economics Research Centre, LSE.
  2. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
  3. Hanson, Andrew, 2009. "Local employment, poverty, and property value effects of geographically-targeted tax incentives: An instrumental variables approach," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 721-731, November.
  4. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2010. "Do unemployed workers benefit from enterprise zones? The French experience," TSE Working Papers 10-201, Toulouse School of Economics (TSE).
  5. Anthony Briant & Miren Lafourcade & Benoît Schmutz, 2012. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," PSE Working Papers halshs-00695225, HAL.
  6. Roland Rathelot & Patrick Sillard, 2008. "The Importance of Local Corporate Taxes in Business Location Decisions: Evidence From French Micro Data," Economic Journal, Royal Economic Society, vol. 118(527), pages 499-514, 03.
  7. Daniele Bondonio, 2003. "Do Tax Incentives Affect Local Economic Growth? What Mean Impacts Miss in the Analysis of Enterprise Zone Policies," Working Papers 03-17, Center for Economic Studies, U.S. Census Bureau.
  8. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2003. "How do Firms Agglomerate? A Study of FDI in France," CEPR Discussion Papers 3873, C.E.P.R. Discussion Papers.
  9. Matias Busso & Jesse Gregory & Patrick M. Kline, 2010. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," NBER Working Papers 16096, National Bureau of Economic Research, Inc.
  10. Boarnet, Marlon G. & Bogart, William T., 1996. "Enterprise Zones and Employment: Evidence from New Jersey," Journal of Urban Economics, Elsevier, vol. 40(2), pages 198-215, September.
  11. Pauline Givord & Roland Rathelot & Patrick Sillard, 2011. "Place-based Tax Exemptions and Displacement Effects : An Evaluation of the Zones Franches Urbaines Program," Working Papers 2011-19, Centre de Recherche en Economie et Statistique.
  12. Bondonio, Daniele & Engberg, John, 2000. "Enterprise zones and local employment: evidence from the states' programs," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 519-549, September.
  13. Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2007. "Firm location decisions, regional grants and agglomeration externalities," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 413-435, April.
  14. Richard Baldwin & Toshihiro Okubo, 2009. "Tax reform, delocation and heterogeneous firms," NBER Working Papers 15109, National Bureau of Economic Research, Inc.
  15. Henry Overman & Elias Einio, 2012. "The Effects of Spatially Targeted Enterprise Initiatives: Evidence from UK LEGI," ERSA conference papers ersa12p164, European Regional Science Association.
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