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The impact of French Zones Franches Urbaines on employment and business creation

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In 2004, 41 Zones Franches Urbaines (ZFU) have replaced less generous Zones de Redynamisation Urbaine (ZRU). ZFUs are particularly generous Enterprise Zones schemes in which establishments are exempted from all taxes and social contributions for 5 years. A first wave of ZFUs was zoned in 1997, followed by a second one in 2004 and a third one in 2006. In spite of the cost of such policies (the net cost of the second-wave ZFUs was around 125 million euros in 2005), the impact has never been assessed by econometricians. In this study, we aim to evaluate the net effect of the ZFU policy on both employment and business creations, using the transformation of less generous ZRUs into ZFUs in 2004. We use micro data on establishments and jobs at an infra-municipal scale. Differences-in-differences as well as standard propensity score matching are used to try to take selection bias into account. We finally identify a significantly positive effect on both business creations and employment. Yet, these effects are weak especially when compared to the magnitude of the costs.

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File Function: Document de travail de la DESE numéro G2007-11
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Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2007-11.

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Date of creation: 2007
Handle: RePEc:crs:wpdeee:g2007-11
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