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

  • Anthony Briant

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

  • Miren Lafourcade

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), ADIS - Analyse des Dynamiques Industrielles et Sociales - Département d'Economie - Université Paris XI - Paris Sud)

  • Benoît Schmutz

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, ADIS - Analyse des Dynamiques Industrielles et Sociales - Département d'Economie - Université Paris XI - Paris Sud, CREST - Centre de Recherche en Économie et Statistique - INSEE - 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
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Handle: RePEc:hal:psewpa:halshs-00695225
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  1. Laurent Gobillon & Thierry Magnac & Harris Selod, 2010. "Do Unemployed Workers Benefit from Enterprise Zones ? The French Experience," Working Papers 2010-45, Centre de Recherche en Economie et Statistique.
  2. Patrick Sillard & Roland Rathelot, 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.
  3. 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.
  4. Givord, Pauline & Rathelot, Roland & Sillard, Patrick, 2013. "Place-based tax exemptions and displacement effects: An evaluation of the Zones Franches Urbaines program," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 151-163.
  5. Matthew Freedman, 2013. "Targeted Business Incentives and Local Labor Markets," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 311-344.
  6. Thierry MAYER & Florian MAYNERIS & Loriane PY, 2012. "The Impact of Urban Enterprise Zones on Establishments' Location Decisions: Evidence from French ZFUs," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," NBER Working Papers 14373, National Bureau of Economic Research, Inc.
  8. Neumark, David & Kolko, Jed, 2010. "Do enterprise zones create jobs? Evidence from California's enterprise zone program," Journal of Urban Economics, Elsevier, vol. 68(1), pages 1-19, July.
  9. Ham, John C. & Swenson, Charles & Imrohoroglu, Ayse & 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(7-8), pages 779-797, August.
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