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Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience

Listed author(s):
  • Anthony Briant

    (SG-CIV - Secrétariat Général du Comité Interministériel des Villes - Ministère de la ville)

  • Miren Lafourcade

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, ADIS - Analyse des Dynamiques Industrielles et Sociales - UP11 - Université Paris-Sud - Paris 11 - Département d'Economie)

  • Benoît Schmutz

    (PSE - Paris School of Economics, ADIS - Analyse des Dynamiques Industrielles et Sociales - UP11 - Université Paris-Sud - Paris 11 - Département d'Economie, CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique)

This paper providesempirical support to the intuitive statement that urban geography matters to the success or failure of place-based public policies, using the French enterprise zone program as a case study. According to the few existing evaluations, this program has only had a small positive average impact on firm and job creation rates. In addition, this impact was shown to be strongly heterogeneous across the treated neighborhoods may account for part of these results. We estimate a series of augmented difference-in-differences models in which we interact the treatment indicator with a series of original indicators of spatial isolation, wich account for severance, peripherality and disconnection to transportation networks within the urban area. Results indicate that isolation does matter to explain spatial differentials in job creation and firm settlement rates across enterprise zones: only accessible neighborhoods were able to draw benefits from tax breaks and social exemptions. moreover, whereas the program mostly worked through a displacement effect on pre-existing firms, we show that urban geography was a clear determinant of the decision to create new firms from scratch.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00695225.

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Date of creation: May 2012
Handle: RePEc:hal:psewpa:halshs-00695225
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00695225
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  1. Mayer,T. & Mayneris, F. & Py, L., 2013. "The impact of Urban Enterprise Zones on establishment location decisions: Evidence from French ZFUs," Working papers 458, Banque de France.
  2. Matias Busso & Jesse Gregory & Patrick Kline, 2011. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," Working Papers 11-07, Center for Economic Studies, U.S. Census Bureau.
  3. repec:pri:rpdevs:deaton_instruments_randomization_learning_all_04april_2010 is not listed on IDEAS
  4. David Neumark & Jed Kolko, 2008. "Do Enterprise Zones Create Jobs? Evidence from California's Enterprise Zone Program," NBER Working Papers 14530, National Bureau of Economic Research, Inc.
  5. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2012. "Do unemployed workers benefit from enterprise zones? The French experience," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 881-892.
  6. Patrick Kline & Enrico Moretti, 2013. "Place Based Policies with Unemployment," NBER Working Papers 18758, National Bureau of Economic Research, Inc.
  7. P. Givord & S. Quantin & C. Trevien, 2012. "A Long-Term Evaluation of the First Generation of the French Urban Enterprise Zones," Documents de Travail de la DESE - Working Papers of the DESE g2012-01, Institut National de la Statistique et des Etudes Economiques, DESE.
  8. Anthony Briant & Miren Lafourcade & Benoît Schmutz, 2015. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 88-124, May.
  9. P. Givord & R. Rathelot & P. Sillard, 2011. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Documents de Travail de la DESE - Working Papers of the DESE g2011-13, Institut National de la Statistique et des Etudes Economiques, DESE.
  10. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-455, June.
  11. Eleonora Patacchini & Yves Zenou, 2007. "Spatial dependence in local unemployment rates," Journal of Economic Geography, Oxford University Press, vol. 7(2), pages 169-191, March.
  12. Freedman, Matthew, 2012. "Teaching new markets old tricks: The effects of subsidized investment on low-income neighborhoods," Journal of Public Economics, Elsevier, vol. 96(11), pages 1000-1014.
  13. Landers, Jim, 2006. "Why Don't Enterprise Zones Work? Estimates of the Extent that EZ Benefits are Capitalized into Property Values," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 36(1).
  14. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
  15. Patrick Kline, 2010. "Place Based Policies, Heterogeneity, and Agglomeration," American Economic Review, American Economic Association, vol. 100(2), pages 383-387, May.
  16. Ham, John C. & Swenson, Charles & İmrohoroğlu, Ayşe & Song, Heonjae, 2011. "Government programs can improve local labor markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community," Journal of Public Economics, Elsevier, vol. 95(7), pages 779-797.
  17. Bondonio, Daniele & Greenbaum, Robert T., 2007. "Do local tax incentives affect economic growth? What mean impacts miss in the analysis of enterprise zone policies," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 121-136, January.
  18. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
  19. Matthew Freedman, 2013. "Targeted Business Incentives and Local Labor Markets," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 311-344.
  20. Jed Kolko & David Neumark, 2009. "Do Some Enterprise Zones Create Jobs?," NBER Working Papers 15206, National Bureau of Economic Research, Inc.
  21. Roland Rathelot & Patrick Sillard, 2008. "Zones Franches Urbaines : quels effets sur l'emploi salarié et les créations d'établissements ?," Économie et Statistique, Programme National Persée, vol. 415(1), pages 81-96.
  22. 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.
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