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Do Unemployed Workers Benefit from Enterprise Zones? The French Experience

  • Gobillon, Laurent

    ()

    (INED, France)

  • Magnac, Thierry

    ()

    (University of Toulouse I)

  • Selod, Harris

    ()

    (Institut National de la Recherche Agronomique)

This paper presents an impact evaluation of the French enterprise zone program which was initiated in 1997 to help unemployed workers find employment by granting a significant wage-tax exemption (about one third of total labor costs) to firms hiring at least 20% of their labor force locally. Drawing from a unique geo-referenced dataset of unemployment spells in the Paris region over an extensive period of time (1993-2003), we are able to measure the direct effect of the program on unemployment duration, distinguishing between short- and medium-term effects. This is done by implementing an original two-stage empirical strategy using individual data in the first stage and aggregate data and conditional linear matching techniques in the second stage. We show that although the enterprise zones program tended to "pick winners", it is likely to be cost-ineffective. It had a small but significant effect on the rate at which unemployed workers find a job (which is increased by a modest 3 percent). This effect is localized and significant only in the short run (i.e. at best during the 3 years that follow the start of the policy).

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6357.

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Length: 44 pages
Date of creation: Feb 2012
Date of revision:
Publication status: published in: Journal of Public Economics, 2012, 96 (9), 881 - 892
Handle: RePEc:iza:izadps:dp6357
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  1. Sylvie Blasco & François Fontaine, 2010. "Étudier le non-recours à l'assurance chômage," Revue économique, Presses de Sciences-Po, vol. 61(5), pages 933-943.
  2. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2001. "Evaluating the employment impact of a mandatory job search assistance program," IFS Working Papers W01/20, Institute for Fiscal Studies.
  3. Joel A. Elvery, 2009. "The Impact of Enterprise Zones on Resident Employment," Economic Development Quarterly, , vol. 23(1), pages 44-59, February.
  4. Laurent Gobillon & Thierry Magnac & Harris Selod, 2007. "The Effect of Location on Finding a Job in the Paris Region," Working Papers 2007-05, Centre de Recherche en Economie et Statistique.
  5. James J. Heckman, 1989. "Choosing Among Alternative Nonexperimental Methods for Estimating the Impact of Social Programs: The Case of Manpower Training," NBER Working Papers 2861, National Bureau of Economic Research, Inc.
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  7. Mauer, David C. & Ott, Steven H., 1999. "On the Optimal Structure of Government Subsidies for Enterprise Zones and Other Locational Development Programs," Journal of Urban Economics, Elsevier, vol. 45(3), pages 421-450, May.
  8. 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.
  9. Joseph G. Altonji & Lewis M. Segal, 1994. "Small Sample Bias in GMM Estimation of Covariance Structures," NBER Technical Working Papers 0156, National Bureau of Economic Research, Inc.
  10. 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.
  11. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2010. "Do unemployed workers benefit from enterprise zones? The French experience," IDEI Working Papers 645, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. 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.
  13. Leslie E. Papke, 1991. "Tax Policy and Urban Development: Evidence From The Indiana Enterprise Zone Program," NBER Working Papers 3945, National Bureau of Economic Research, Inc.
  14. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
  15. Manning, Alan & Pischke, Jörn-Steffen, 2006. "Comprehensive versus Selective Schooling in England and Wales: What Do We Know?," CEPR Discussion Papers 5653, C.E.P.R. Discussion Papers.
  16. Richard Blundell & Monica Costa Dias, 2002. "Alternative approaches to evaluation in empirical microeconomics," CeMMAP working papers CWP10/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  17. Cynthia L. Rogers & Jill L. Tao, 2004. "Quasi-Experimental Analysis of Targeted Economic Development Programs: Lessons from Florida," Economic Development Quarterly, , vol. 18(3), pages 269-285, August.
  18. 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.
  19. 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.
  20. Ridder, G. & Tunali, I., 1997. "Stratified Partial Likelihood Estimation," Papers 1997/17, Koc University.
  21. Peter S. Fisher, 1997. "Tax and spending incentives and enterprise zones," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 109-138.
  22. Matias Busso & Patrick Kline, 2008. "Do Local Economic Development Programs Work? Evidence from the Federal Empowerment Zone Program," Cowles Foundation Discussion Papers 1639, Cowles Foundation for Research in Economics, Yale University.
  23. O'Keefe, Suzanne, 2004. "Job creation in California's enterprise zones: a comparison using a propensity score matching model," Journal of Urban Economics, Elsevier, vol. 55(1), pages 131-150, January.
  24. 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.
  25. Raphael W. Bostic & Allen C. Prohofsky, 2006. "Enterprise Zones and Individual Welfare: A Case Study of California," Journal of Regional Science, Wiley Blackwell, vol. 46(2), pages 175-203.
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