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Enterprise Zones and Individual Welfare: A Case Study of California

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  • Raphael W. Bostic
  • Allen C. Prohofsky

Abstract

A now popular economic development tool for states, enterprise zone programs attemptto increase business investment, employment, and wages in depressed areas by offering labor andcapital subsidies to firms operating in the designated zones. While a number of studies haveexamined the effects of EZs on business activity, few have explored how these zones haveinfluenced individuals. This research examines the benefits to individual workers hired underCalifornia’s EZ program using information from tax returns to document changes in the economicstatus of workers directly affected by the designation of enterprise zones in their local areas. Theanalysis reveals that EZ program participation has a positive impact on both wages and adjustedgross income (AGI) of EZ participants. It is not possible, however, to determine from our data ifthe income boost from EZ participation is permanent or transitory in nature. The data suggestthat EZ participation may benefit taxpayers with very low initial income more than those withsomewhat higher initial income. We also find that participation in the EZ program increases thelikelihood that an individual will file a tax return. Since this is a case study, we caution thatadditional analysis is needed to fully determine the extent to which these results can begeneralized.

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  • Raphael W. Bostic & Allen C. Prohofsky, 2003. "Enterprise Zones and Individual Welfare: A Case Study of California," Working Paper 8609, USC Lusk Center for Real Estate.
  • Handle: RePEc:luk:wpaper:8609
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    Cited by:

    1. Robert T. Greenbaum & Jim Landers, 2009. "Why Are State Policy Makers Still Proponents of Enterprise Zones? What Explains Their Action in the Face of a Preponderance of the Research?," International Regional Science Review, , vol. 32(4), pages 466-479, October.
    2. Gobillon, Laurent & Magnac, Thierry & Selod, Haris, 2012. "L’effet des Zones Franches Urbaines sur le Retour à l’Emploi," CEPREMAP Working Papers (Docweb) 1209, CEPREMAP.
    3. 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.
    4. Margaret Dewar, 2013. "Paying Employers to Hire Local Workers in Distressed Places," Economic Development Quarterly, , vol. 27(4), pages 284-300, November.
    5. Judith K. Hellerstein & David Neumark, 2011. "Employment in Black Urban Labor Markets: Problems and Solutions," NBER Working Papers 16986, National Bureau of Economic Research, Inc.
    6. Sumei Zhang, 2015. "Impacts of Enterprise Zone Policy on Industry Growth," Economic Development Quarterly, , vol. 29(4), pages 347-362, November.
    7. 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.
    8. Sumei Zhang, 2019. "Rethinking U.S. enterprise zones: The role of research design in program evaluation," Local Economy, London South Bank University, vol. 34(6), pages 545-571, September.
    9. Andrew Hanson & Shawn Rohlin, 2011. "The Effect of Location-Based Tax Incentives on Establishment Location and Employment across Industry Sectors," Public Finance Review, , vol. 39(2), pages 195-225, March.
    10. Sumei Zhang, 2020. "Do Research Methods Matter in Enterprise Zone Outcome Evaluations?," Economic Development Quarterly, , vol. 34(3), pages 299-309, August.

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